PepsiCo Divests Stake, Strauss to Gain Control of Israeli Snack Unit
Translated & summarized from Calcalist by baba
PepsiCo is selling its stake in its Israeli snack joint venture, Frito-Lay Israel, to its partner Strauss Group, which will gain controlling interest. This follows PepsiCo's earlier exit from a partnership in spreads companies. The deal, which includes an option for Strauss to increase its stake, is expected to result in a significant capital gain for Strauss. The move occurs amid ongoing boycott campaigns against companies operating in Israel.
The story in 5 lines · by baba
- PepsiCo is selling its stake in Frito-Lay Israel to Strauss Group, granting Strauss control.
- The deal follows PepsiCo's earlier exit from a joint venture in spreads companies Sabra and Obela.
- Strauss expects a one-time accounting capital gain of approximately 630-650 million shekels.
- The snack venture's divestment comes after years of boycott campaigns by the BDS movement.
- Strauss will gain majority voting rights on Frito-Lay's board and the right to appoint the CEO.
PepsiCo is significantly reducing its presence in Israel, with its local partner Strauss Group set to gain controlling interest in their joint venture, Frito-Lay Israel. This move follows PepsiCo's earlier exit from a partnership in spreads companies, Sabra and Obela, in November 2024. In that prior deal, PepsiCo acquired Strauss's 50% stake for approximately $240 million and granted Strauss an option to purchase up to 2.5% of Frito-Lay's shares for up to $9.9 million. This option, exercisable within two years of the Sabra deal's completion and subject to regulatory approval, would solidify Strauss's control over Frito-Lay Israel, known for brands like Doritos and Cheetos produced at its Sderot factory.
Strauss is expected to consolidate Frito-Lay's financial results starting from the quarter in which the option is exercised. The company anticipates a one-time accounting capital gain of approximately 630-650 million shekels from the transaction. The divestment from the snack venture, which leverages PepsiCo's product development knowledge, comes after years of boycott campaigns by the BDS movement against the company and its products.
While BDS claimed the earlier Sabra divestment as a success of their campaign, the article suggests that poor performance, particularly following a Salmonella contamination issue at a Virginia hummus factory that led to an FDA investigation, was a primary driver for PepsiCo's exit from Sabra. The agreement also stipulates amendments to the shareholder agreement, granting Strauss majority voting rights on Frito-Lay's board and the right to appoint the CEO, though PepsiCo retains limited veto power. Frito-Lay Israel pays PepsiCo quarterly royalties based on sales, along with an annual fee for technical support, with payments totaling around 10.5 million shekels and 10 million shekels in 2024 and 2025 respectively.