PepsiCo (NASDAQ: PEP) disclosed a USD550 Million investment in energy drink producer Celsius Holdings amid a long-term distribution deal with the company. Celsius shares rose 8% during morning trading amid the news.
The distribution agreement is effective as of August 1, 2022 and is subject to certain exemptions. Furthermore, PepsiCo will now be the preferred distribution partner globally for Celsius.
Amid the agreement, shares underlying the deal were priced at USD75 per share, or about 7.33 million shares. Pepsi’s investment equates to a minority stake of about 8.5% in Celsius on an as-converted level. The preferred shares are entitled to a 5% annual dividend.
“We are extremely pleased to partner with Celsius and excited about the opportunity for our two organizations to drive growth and innovation in the energy beverage category,” said Kirk Tanner, CEO, PepsiCo Beverages North America. “The Celsius brand’s growing momentum coupled with the strength of PepsiCo’s portfolio and go-to-market capabilities create a combination we believe will be very compelling and valuable to retailers and consumers. We are looking forward to seeing the impact these two outstanding organizations can make together to more fully capture energy occasions.”
The agreement ultimately strengthens Pepsi’s relationship with energy drinks. The category is now one of the fastest growing beverage segments other than alcohol, and Pepsi has been committed to further investing in energy throughout the past few years as soda sales fall.