SodaStream International Ltd (SODA) Up On A Possible PepsiCo Deal

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Sodastream
By Smannel (Own work) [CC BY-SA 3.0], via Wikimedia Commons

 Sodastream International Ltd (NASDAQ:SODA) stock surged 7% to close at $38.35 on Thursday after hitting over $40 mark in early trading session. Shares of the soda maker tumbled Wednesday following the news that The Coca-Cola Company (NYSE:KO) has acquired 10% stake in Green Mountain Coffee Roasters, which plans to launch a cold beverage system towards the end of this year or early next year.

Coke’s stake in Green Mountain prompted the volatility

Investors of Sodastream International Ltd (NASDAQ:SODA) were cautious regarding the partnership initially despite the company posting solid growth, in the recent years. However, the shares regained Thursday morning after analysts noted that PepsiCo, Inc. (NYSE:PEP) could be a potential investor in SodaStream, says a report from CNN.

Citron Research in its report noted that Coke and PepsiCo, Inc. (NYSE:PEP) are arch-rivals, and have followed each others’ lead at various times. Apart from Soda, Coke and Pepsi compete in segments like orange juice, sports drinks, bottled water and smoothies.

“Now Coke has made their move into the at-home beverage market. What are the chances Pepsi won’t respond?” Citron states in its report. “Unless they believe that Coke is DEAD WRONG — they have no choice. Hello SodaStream!”

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SodaStream a better investment now for Pepsi

Last year, in June, SodaStream International Ltd (NASDAQ:SODA) and Pepsi discussed the potential deal, but shares of SodaStream were over $75 at that time. SodaStream is a better investment opportunity for Pepsi at current valuations. Coca-Cola shelled out $1.25 billion to purchase a stake in Green Mountain. At this amount, Pepsi is capable of buying SodaStream’s whole stock for $60 per share, according to the research report for Citron.

Citron stated that the PepsiCo, Inc. (NYSE:PEP) – Sodastream International Ltd (NASDAQ:SODA) deal would be relevant from multiple aspects as the soda company is the sole player in “the space of any consequence.” The company has a brand and global distribution network that provides a lot of potential for Pepsi.

Citron does not see any possibility of Pepsi spending $1.25 billion on SodaStream, at present, but the stock is definitely poised to grow upward. If compared to current market value of Green Mountain, Soda Stream is expected to be worth $131 and $262.

SodaStream International Ltd (NASDAQ:SODA) is conscious about any probable partnership, and said that Coca Cola’s entry in the $260 billion “custom carbonation” industry indicates the possible impact of the global opportunity that lies ahead of the company.