Processing Magazine

PepsiCo sues Pepsi Bottling Group over meeting

May 11, 2009
According to the Associated Press, PepsiCo Inc.''s proposed buyout of its two biggest bottlers took a new turn when the soft drink maker sued one of the companies over the way it rejected the deal and approved shareholder rights measures. Purchase, N.Y.-based PepsiCo contends Pepsi Bottling Group didn''t give proper notice of the meeting where the bulk of the bottler''s board voted to reject the offer and approved a shareholder rights plan. Shareholder rights plans, known as "poison pills," are used to try to hold off hostile takeover attempts by making it more expensive for a suitor to acquire shares. The lawsuit against Pepsi Bottling and some of its directors is PepsiCo''s first official move since Pepsi Bottling and PepsiAmericas, the other top bottler, announced that they were rejecting PepsiCo''s proposed $6 billion bid, saying the bid undervalued them. PepsiCo believes the price is fair. It is asking the court to "remove the roadblocks to a potential transaction" by ruling that the actions at certain Pepsi Bottling meetings are not valid, that the bottlers have breached their duties to shareholders and that PepsiCo executives who sit on Pepsi Bottling''s board be notified of meetings. PepsiCo said in the lawsuit that its two executives on Pepsi Bottling''s board of directors were not notified of certain board meetings after the offer was announced in April, and that makes actions taken at those meetings invalid. According to the lawsuit, Pepsi Bottling Senior Counsel Steven Rapp e-mailed John C. Compton, chief executive of PepsiCo Americas Foods, and Cynthia M. Trudell, PepsiCo''s chief personnel officer, saying they would not be notified of meetings where the deal is the sole topic of discussion because they wouldn''t be able to participate in the meetings anyway. PepsiCo argues otherwise. "In order for the special meeting to have been valid, Compton and Trudell must have been provided notice and given an opportunity to participate or to recuse themselves where appropriate," PepsiCo said in the lawsuit. PepsiCo also argues that because other topics, chiefly the poison pill, were covered the two other board members should have been notified. PepsiCo has maintained that the deal would help it save at least $200 million a year before taxes and better respond to a changing marketplace as consumers focus less on soft drinks and more on juices and teas. If the sale went through, PepsiCo would control distribution of 80 percent of its total North American beverage volume. The company already owns about 33 percent of Pepsi Bottling Group and 43 percent of Minneapolis-based PepsiAmericas.