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

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

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“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!”

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.

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