The bottlers of Pepsi in Dubai and Abu Dhabi plan to explore a merger that could create one of the largest distributors of soft drinks in the region.
Dubai Refreshments, the publicly traded distributor of Pepsi in Dubai and the Northern Emirates, has started merger talks with Abu Dhabi Refreshments, the unlisted franchisee distributer of the same beverage in the emirate.
Dubai Refreshments, which has a market value of about US$300 million, said no commitments had yet been made, but it would create a working group to consider all the legal and commercial aspects of the proposed merger. A recommendation would be submitted to the boards of both companies within a couple of months, it said.
“The proposed merger shall be subject to careful review and examination by the two companies and their respective consultants who will make appropriate recommendations as to the viability of and the most appropriate structure to implement the proposed merger,” Ahmad Bin Eisa Al Serkal, Dubai Refreshment’s chairman, said in a statement to the Dubai Financial Market.
No other details of the merger talks were given by Dubai Refreshments, which has been bottling and distributing Pepsi since 1962.
PepsiCo, the biggest snack maker in the world, said in October that its net income in the three months ended September 7 rose 0.6 per cent to $1.91 billion from $1.9bn, according to Bloomberg, a provider of financial news and data. That beat analyst estimates on the back of sales in the United States and Latin America.
About half of PepsiCo’s $65.5bn in revenue last year came from outside the US. Growth in the emerging markets of Asia, the Middle East and Africa are now bigger than the US and Europe.
No one was immediately available to comment at either Dubai Refreshments or Abu Dhabi Refreshments.
Consumer companies are under-represented on the stock exchanges of Dubai and Abu Dhabi and investors may relish more exposure to a sector that gets a boost from high levels of non-essential spending and tourism if the outcome of the merger talks is a bigger and more liquid company with higher revenues.
“Discretionary consumer spending in the UAE is among the highest in the region and broader emerging markets space,” said Mohammad Kamal, a Dubai-based analyst at the investment bank Arqaam Capital.
“Increases in public-sector wage packages, rising disposable income and a persistent low interest rate environment in GCC states will continue to support consumer spending on discretionary goods.”
Coca-Cola and Dubai Refreshments made a splash here in 2011 when they raised the price of soft drink cans by 50 per cent to Dh1.5 after maintaining the price at Dh1 for more than 20 years.
Last year Dubai Refreshments and its competitor, Al Ahlia Gulf Line, the Coca-Cola distributor in the UAE, were involved in a spat with the Government, which had accused them of misleading consumers by selling smaller-sized cans in retail stores.
Confusion surrounded whether the bottlers had done anything wrong and one major store, LuLu Hypermarket, cleared cans from its shelves because it thought it might be breaking the law.
The issue was eventually resolved with no repercussions for either bottler.
Shares of Dubai Refreshments have traded flat this year, with a year-to-date gain of 0.8 per cent. The company’s net income increased 23 per cent in 2012 to Dh162.6 million
mkassem@thenational.ae