FTC gives green light to PepsiCo’s £3.09 billion acquisition of RockStar Energy

PepsiCo (NASDAQ: PEP) announced its plans of acquiring Rockstar Energy for £3.09 billion in March. In an announcement on Friday, the company said that it has received approval for the acquisition from the Federal Trade Commission (FTC).

PepsiCo also added that following the FTC’s approval, the company is now expected to complete the transaction in the upcoming days.

The FTC said that it meticulously reviewed the acquisition to ensure that it wouldn’t post a threat to fair competition. PepsiCo has a stake in Starbucks energy drinks and is also the owner of the world-renowned, Mountain Dew Kickstart.

Rockstar’s Market Share Dropped From 20% To 10% In Recent Years

As per the sources, the FTC’s concerns of reduced competition due to the acquisition were relieved by the fact that Rockstar saw a massive 50% decline in its market share from 20% to 10% in recent years. PepsiCo’s rivals in this market will now be Monster and Red Bull, both of which are partly owned by Coca-Cola.

The sources further added that founder Russell Weiner of Rockstar will no longer hold a big position under PepsiCo’s ownership.

Following the acquisition, PepsiCo will be able to launch new energy drinks in the market as well. Being a Rockstar’s distributor, the company was previously restricted from introducing its own brands as competitors.

PepsiCo’s Mountain Dew Kickstart is primarily seen as an energy drink, however, its caffeine content is relatively lower as compared to the competitors like Red Bull. PepsiCo also advertises the brand as a breakfast beverage.

The FTC did not respond to requests for comment.

PepsiCo To hire 6,000 New Workers In The Upcoming Months

The American multinational food and beverage company had also announced in late March that it will expand its workforce by 6,000 new workers in the upcoming months. The company had also offered enhanced benefits and additional compensation to its frontline employees in the U.S amidst the ongoing Coronavirus pandemic. The move covered roughly 90,000 of PepsiCo’s workers.

At the time of writing, PepsiCo is exchanging hands at £110 per share in the stock market that translates to an around 1% increase in 2020 so far. On March 20^th, the stock had dropped to as low as £83 per share.

Its performance in 2019, on the contrary, was reported fairly upbeat with an annual gain of more than 20%.

PepsiCo currently has a market cap of £152.62 billion and a price to earnings ratio of 26.37.