PepsiCo (PEP) Investing $550 Million Into Celsius (CELH) As Part Of Strategic Deal

By Amit Chowdhry ● Aug 1, 2022
  • PepsiCo (PEP) and Celsius Holdings (CELH) announced a long-term strategic distribution arrangement. These are the details.

PepsiCo (PEP) and Celsius Holdings (NASDAQ: CELH), the maker of a leading global fitness energy drink called CELSIUS announced a definitive agreement forging a long-term strategic distribution arrangement. This distribution agreement initially transitions Celsius’ current U.S. distribution to PepsiCo’s best-in-class capabilities. As part of the deal, PepsiCo will also make an investment in Celsius in support of its growth agenda and will nominate a director to serve on Celsius’ Board of Directors.

The long-term U.S. distribution agreement is effective on August 1, 2022, and, subject to certain exceptions, includes retail and food service channels. And PepsiCo will also become the preferred distribution partner globally for Celsius.

As part of the deal, PepsiCo will make a net cash investment of $550 million to Celsius in exchange for convertible preferred stock. And the shares underlying the transaction were priced at $75 per share, or approximately 7.33 million shares, which equates to an estimated 8.5% ownership in Celsius on an as-converted basis. These preferred shares are entitled to a 5% annual dividend.

KEY QUOTES:

“We are extremely pleased to partner with Celsius and excited about the opportunity for our two organizations to drive growth and innovation in the energy beverage category. The Celsius brand’s growing momentum coupled with the strength of PepsiCo’s portfolio and go-to-market capabilities create a combination we believe will be very compelling and valuable to retailers and consumers. We are looking forward to seeing the impact these two outstanding organizations can make together to more fully capture energy occasions.”

— Kirk Tanner, CEO, PepsiCo Beverages North America

“I would first like to thank our employees and partners who have helped facilitate our rapid growth. We believe the opportunity to partner with a global best-in-class distributor provides Celsius with significant near-term additional shelf space in both existing retailers as well as new expansion within the independent retailers that represent a significant portion of the U.S. convenience and gas channel where approximately 70% of energy drinks are sold. It also provides a strategic partnership that is expected to accelerate growth for both companies globally. In addition, this partnership will drive efficiencies allowing our teams to consolidate sales, marketing, and distribution efforts with associated cost benefits, which we expect to recognize once the initial transition is completed. We look forward to partnering with PepsiCo and maximizing the opportunities we see ahead for Celsius and our shareholders.”

— Celsius President, Chairman and CEO John Fieldly