Pepsi buys SodaStream for a future beyond cola

Palestinians work at a Soda Stream factory in the Mishor Adumim industrial park next to the Ma'ale Adumim

Palestinians work at a Soda Stream factory in the Mishor Adumim industrial park next to the Ma'ale Adumim

SodaStream, which claims it is the largest sparkling water brand in the world, provides machines that enable consumers to make their own fizzy drinks or flavoured waters - meaning there is less need to buy bottles of drink.

PepsiCo chairman and chief executive Indra Nooyi described the companies as "an inspired match".

Monday's sale looks to inject another big tax payout to Israel following previous the sales of Israeli companies such as the mobile navigation app Waze, which was acquired by Google for about $1 billion U.S., and Mobileye, which produces technology for self-driving cars and was gobbled up by Intel a year ago for $15 billion US.

It removes what initially was seen by some as a threat to PepsiCo's bottled soda business, which has struggled as consumers migrate to healthier choices.

SodaStream's US -listed shares were up 10.5 percent in pre-market trading.

The deal will be funded using Pepsi's cash on hand and has been unanimously approved by the boards of both companies. Over the years, many users have used Sodastream only for making fizzy water, without the flavored syrups it sells.

Other soft-drink producers have tried to tap the at-home market, though success has been elusive.

It remains to be seen what Keurig Dr Pepper (KDP.N) will do in the space.

Matthew Barry, senior analyst of beverages at Euromonitor International, said deals like the SodaStream purchase were vital for PepsiCo as it passes to new management.

Citing financial reasons, Sodastream closed the plant in 2015 and moved to Lehavim, in southern Israel.

SodaStream shares have jumped 49 per cent this month after the company boosted its forecast for revenue growth this year to 23 per cent and reported first-half figures that beat estimates.

Pepsi said its strong global distribution capabilities would position SodaStream for further expansion.

The company was acquired by Israel's Soda-Club in 1998 before private equity group Fortissimo Capital bought a controlling stake in 2007. Goldman Sachs and Centerview advised PepsiCo, while Perella Weinberg Partners gave advice to SodaStream.

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