PepsiCo has agreed to acquire all outstanding shares of South African food and beverage producer Pioneer Foods Group in a deal valued at $1.7bn.

As per the agreement, PepsiCo will pay R110 for each Pioneer share, which represents a premium of 56% of the share price measured over the last month.

Pioneer Foods sells cereals, juices and other snacks under brands such as Weet-Bix, Liqui-Fruit and Ceres.

Pepsi said that the acquisition will “gain a solid beachhead for expansion into Sub-Saharan Africa by boosting the company’s manufacturing and go-to-market capabilities.”

PepsiCo chairman and CEO Ramon Laguarta said: “We are absolutely thrilled to join forces with Pioneer Foods, one of South Africa’s leading food and beverage companies.

“Pioneer Foods represents a differentiated opportunity for PepsiCo and allows us to immediately scale our business in Africa. Pioneer Foods forms an important part of our strategy to not only expand in South Africa but further into sub-Saharan Africa as well.”

The deal has been unanimously approved by the boards of directors for both companies and will be funded through a combination of debt and cash.

The completion of the deal is subject to approval by Pioneer Foods shareholder and certain regulatory approvals.

The deal is expected to conclude by the first quarter of 2020.

Pioneer Foods CEO Tertius Carstens said: “Today’s announcement marks a very exciting milestone for Pioneer Foods and our people, and highlights the strength of what we have created.

“As part of PepsiCo, we will have greater scale to expand our leading brands, greater capital to invest in local agriculture and people, greater access to leading global capabilities and a partner committed to taking our company to even greater heights.”

As part of this transaction, PepsiCo will also create a new operating sector for Sub-Saharan Africa (SSA).

PepsiCo SSA will be led by Eugene Willemsen and will remain part of Europe Sub-Saharan Africa (ESSA) from a financial reporting perspective.

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