Multinational Acquisition Essay
Prof. Neil Riley ACC 401
PEPSICO AND QUAKER OATS COMPANY
By the end of 1999, following a multi-year restricting effort, PepsiCo had once again become one of the most successful consumer products companies in the world. In less than four years, it had achieved an 80% increase in net income, on 30% lower sales, and with 75% fewer employees! PepsiCo’s major subsidiaries were the Pepsi-Cola Company, which was the world’s largest manufacturer and distributor of snack chips, and Tropicana Products, the largest marketer of branded juices. Throughout 1999, PepsiCo was closely tracking several potential strategic acquisitions. In the fall of 2000, it appeared that the right …show more content…
The merger between PepsiCo and Quaker Oats was structured as a stock for stock exchange. PepsiCo shareholders own 82% of the combined firms and Quaker Oats shareholders own the remaining 18%, therefore, PepsiCo owns the majority of the stock. This also means that Quaker Oats is now a subsidiary of PepsiCo. The approximate amount for the recorded value of the acquisition of PepsiCo’s books was $613 million and the market value of the acquisition was $13 billion. Under the Quaker merger agreement dated December 2, 2000, Quaker shareholders received 2.3 shares of PepsiCo common stock in exchange for 1 share of Quaker common stock, including a cash payment for fractional shares. PepsiCo issued approximately 306 million shares of common stock in exchange for all the outstanding common stock of Quaker Oats. Quaker Oats’ trademark, goodwill, and in-process research and development will not be recorded in the acquisition.
The pooling-of-interests method was the accounting method that was used to account for the PepsiCo and Quaker Oats merger. The reporting implications for the pooling-of-interests method are as follows:
1) Revenues and expenses were combined retroactively for the two companies.
2) Assets and liabilities of subsidiary (Quaker Oats)