- PepsiCo announced it entered into an agreement to buy popular energy drink maker Rockstar Energy Beverages for $3.85 billion. These are the details.
Today PepsiCo announced that it has entered into an agreement to buy popular energy drink maker Rockstar Energy Beverages for $3.85 billion. Launched in 2001, Rockstar creates products available in more than 30 flavors at convenience and grocery outlets in over 30 countries. And PepsiCo has had a distribution agreement with Rockstar in North America since 2009. Along with Rockstar, PepsiCo’s energy portfolio includes Mountain Dew’s Kickstart, GameFuel, and AMP.
PepsiCo also entered into an agreement, which will provide approximately $0.7 billion of payments related to future tax benefits associated with the transaction, payable over up to 15 years. And PepsiCo does not expect the transaction to be material to its revenue or earnings per share in 2020. The transaction is subject to customary closing conditions, including regulatory approval and is expected to close in the first half of 2020.
PepsiCo’s products are consumed over one billion times a day in more than 200 countries and territories around the world. Last year, PepsiCo generated over $67 billion in net revenue in 2019, which was driven by a complementary food and beverage portfolio that includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. PepsiCo’s product portfolio includes 23 brands that generate more than $1 billion each in estimated annual retail sales.
The leader in the energy drink category is Austria-based Red Bull GmbH. Red Bull sells 7.5 billion cans annually. And 700 million of those cans are sold in the U.S. Rockstar sells about 70 million cans in the U.S. per year.
Rockstar was launched by Russell Weiner in 2001. According to Orbis via Bloomberg, Russell owns 85% of Rockstar and his mother Janet owns the rest. Weiner’s father is conservative radio host Michael Savage.
Before launching Rockstar, Weiner worked for Skyy Vodka founder Maurice Kanbar in product development. After a year of working at Skyy, he launched Rockstar using $50,000 he got from a mortgage on his condo in California. Weiner’s goal was to sell a beverage that was twice the volume of an 8-ounce Red Bull can at the same price. After trying hundreds of flavors, he decided to go with a combination of natural ingredients like milk thistle and guarana.
The second-largest player in the energy drink space is Monster. Monster is a publicly-traded company with a valuation of more than $35 billion.
Centerview Partners LLC acted as financial advisor to PepsiCo. And Gibson, Dunn & Crutcher LLP acted as lead counsel to PepsiCo and Davis Polk & Wardwell LLP as U.S. tax and antitrust counsel. And Goldman Sachs & Co. LLC acted as financial advisor to Rockstar with King & Spalding acting as Rockstar’s legal counsel.
Key Quotes:
“As we work to be more consumer-centric and capitalize on rising demand in the functional beverage space, this highly strategic acquisition will enable us to leverage PepsiCo’s capabilities to both accelerate Rockstar’s performance and unlock our ability to expand in the category with existing brands such as Mountain Dew. Over time, we expect to capture our fair share of this fast-growing, highly profitable category and create meaningful new partnerships in the energy space.”
-PepsiCo Chairman and CEO, Ramon Laguarta
“We have had a strong partnership with PepsiCo for the last decade, and I’m happy to take that to the next level and join forces as one company. PepsiCo shares our competitive spirit and will invest in growing our brand even further. I’m proud of what we built and how we’ve changed the game in the energy space.”
-Rockstar founder and creator of the world’s first 16oz energy drink Russell Weiner
