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Who Will Buy SodaStream? Pepsi or Coke?

In news reported by Reuters early Thursday morning, PepsiCo (NYSE: PEP) is interested in purchasing Israeli company, SodaStream International (NASDAQ: SODA). According to the report, PepsiCo made an offer through Goldman Sachs (NYSE: GS) of $2 billion representing a 42 percent premium over SodaStream’s $1.4 billion market cap.

The company may also consider raising its bid, according to the report. It may go as high as $95 per share representing a 37 percent premium over SodaStream’s close on Wednesday. In pre-market trading, SodaStream is up about 11 percent but was, earlier, up more than 30 percent on the news.

The company is reportedly asking Coca-Cola (NYSE: KO) if it has any interest. This could be the start of an interesting bidding war between these two beverage giants.

Why would a company like PepsiCo or Coca-Cola be interested in SodaStream? Using the company’s soda machine, flavor options and CO2, consumers can create and bottle their own soda.

It’s the perfect business model. Much like Green Mountain Coffee’s (NYSE: GMCR) Kurig machine, even if the machine has low margins, the fact that consumers have to keep buying the higher margin accessories, makes for a constant stream of revenue.

Imagine PepsiCo selling the flavors with the Pepsi brand printed on the bottles. A brand name cola produced by the SodaStream system could be a huge revenue driver.

UPDATE: As of 7:15 a.m. EST, PepsiCo CEO Indra Nooyi saying that this story is untrue, according to Bloomberg and CNBC.

Disclosure: At the time of this writing, Tim Parker had no position in any of the equities mentioned.

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