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PepsiCo, American food and beverage giant, has offered to acquire Pioneer Foods, one of the largest food and beverage companies in South Africa, for approximately $1.7 billion, according to a statement released today. PepsiCo said it entered into an agreement to acquire all the outstanding shares of Pioneer Foods Group Ltd for R110 per share, which represents a 56 percent premium on the stock.

According to CNBC Africa, the transaction is one of PepsiCo’s largest outside of the United States. The acquisition is part of PepsiCo’s expansion drive in Sub-Saharan Africa. The company plans to boost its manufacturing and go-to-market capabilities, enable scale and distribution across the region.  

“As we look to accelerate our growth in key markets around the world and achieve our vision to Be the Global Leader in Convenient Foods and Beverages by Winning with Purpose, we are absolutely thrilled to join forces with Pioneer Foods, one of South Africa’s leading food and beverage companies,” said PepsiCo Chairman and CEO, Ramon Laguarta. “Pioneer Foods forms an important part of our strategy to not only expand in South Africa, but further into sub-Saharan Africa as well.”

Pioneer Foods, whose range of branded food and beverage products include cereals, juices, and other nutritional food staples like Weet-Bix, Liqui-Fruit, Ceres, Sasko, Safari, Spekko, recorded revenue of R20.2 billion in 2018.

“As part of PepsiCo, we will have greater scale to expand our leading brands, greater capital to invest in local agriculture and people, greater access to leading global capabilities and a partner committed to taking our company to even greater heights,” said Tertius Carstens, CEO of Pioneer Foods.

The acquisition, according to the statement, will be funded through a combination of debt and cash, and has been unanimously approved by the Boards of Directors of both companies. However, the transaction –expected to close by Q1 2020 – is subject to a Pioneer Foods shareholder vote, regulatory approvals, and other customary conditions. Both Pioneer Foods and PepsiCo said they are aligned around a vision to build a more sustainable future and invest in communities.