PepsiCo's Russia deal gets initial go-ahead
PepsiCo's biggest acquisition outside the United States made progress on Monday when the head of Russia's anti-monopoly service said he looked favourably on the US giant's takeover of a major local firm.
PepsiCo -- which was the first US consumer goods company to break into the Soviet market in 1973 -- on December 2 said that it had agreed to pay 5.4 billion dollars (4.1 billion euros) for Russia's largest dairy and baby food producer Wimm-Bill-Dann.
The takeover would be one of the biggest outside the Russian energy sector and enable PepsiCo to become not only the country's largest food-and-beverage business but also expand further into eastern Europe and the former Soviet states.
Russia's Federal Anti-Monopoly Service (FAS) still needs to approve the acquisition and its chief told reporters Monday that he supported the deal.
"We are well disposed toward this transaction," news agencies quoted FAS head Igor Artermyev as saying. "We see absolutely no problems there."
He said that Russia's strict anti-monopoly laws would probably require the US food and beverage behemoth to produce quarterly reports that showed that its trade did not discourage competition on the local market.
Wimm-Bill-Dann -- named in honour of its founder's love for tennis -- controls just over 40 percent of Russia juice and 30 percent of its dairy markets.
It was not clear when a formal ruling on the deal would be issued although PepsiCo officials had previously said that they hoped to receive formal approval by April at the latest.
The announced agreement envisions PepsiCo taking immediate control of a 66-percent stake in Wimm-Bill-Dann for 3.8 billion dollars.
The remaining shares are to be bought progressively in an acquisition that PepsiCo hopes will enable it to establish a 30-billion-dollar nutrition business by 2020.
Analysts said the deal should help support the Russian investment climate because it showed that the authorities were open to Western investments in some of the country's most lucrative fields.
"This deal has unambiguously shown that it was not only theoretically possible to acquire a controlling stake of a Russian company after the crisis, but that it was also possible in practical terms," IFC Metropol analyst Hawk Sunshine wrote in an op-ed piece for the Vedomosti business daily.
"Perhaps this should be seen as a sign of a shift in Russia's attitude toward foreign companies and a sign of its renewed interest in foreign investments."
The 2009 global financial crisis shrank Russia's economy by 7.9 percent and set back President Dmitry Medvedev's efforts to invest in a diversification programme that could wean the country off its dependence on energy revenues.
Analysts said that has made Western investments all the more important to Russia's future.
"If the modernisation programme is going to work, the government will need to attract a lot more money than has been previously invested in Russia," said chief UralSib strategist Chris Weafer.
"The next phase of Russia's development will have to be funded with increased levels of foreign investment."
PepsiCo's choice of a Russian partner has fallen one of the the country's most well-respected consumer firms.
Wimm-Bill-Dann was founded in 1992 and has managed to double its revenues since 2005 on the back of 20-percent annual accrued growth of the Russian dairy market.
© 2010 AFP