Settlement Approved in Pepsi Bottling Cos. Takeover Lawsuits

6/1/2010 - On June 1, 2010, Vice Chancellor Strine of the Delaware Court of Chancery granted final approval of a settlement of cases brought by shareholders of Pepsi Bottling Group (“PBG”) and PepsiAmericas, Inc. (“PAS”), challenging the offers made in April 2009 by PepsiCo, Inc. to acquire its two primary bottling companies.  Barrack, Rodos & Bacine had filed the first case challenging the proposed takeovers with a complaint for BR&B client IBEW Local 98, which was thereafter appointed by the court to serve as a lead plaintiff in the cases brought on behalf of PBG shareholders. The lawsuit challenged both the proposed PBG takeover based on the initial offer price of $29.50 per share, which IBEW Local 98 asserted was grossly inadequate, and a term in the offers made by PepsiCo that made completion of the acquisition of each of the bottling companies contingent on approval of both proposed acquisitions. After significant litigation of the PBG and PAS actions, and through negotiations of special committees of both bottling companies’ boards, PepsiCo agreed to: (a) significantly higher acquisition prices that provided PBG shareholders as a group with $1.022 billion more in value ($36.50 per PBG share) and PAS shareholders as a group with $290 million more in value (increasing it offer from $23.27 to $28.50 per PAS share); (b) delete the cross-conditionality provision for the two deals; (c) reductions in the merger agreements' termination fees and termination tail periods; and (d) additional disclosures in the final proxy statements for the two deals. At the final settlement hearing, Vice Chancellor Strine noted the substantial price increases offered by PepsiCo, and credited the litigation brought by BR&B client IBEW Local 98 and others as a causal factor in prompting PepsiCo to make fuller offers for the bottling companies. There were no objections by any PBG or PAS shareholder to the settlement.

If you have any questions about this case, please contact BR&B partner Jeffrey W. Golan by telephone at (215) 963-0600, or by email atjgolan@barrack.com.