NEW YORK (CNNfn) - Quaker Oats Co. and PepsiCo Inc. said Friday their proposed merger will be delayed at least until the third quarter as discussions with the Federal Trade Commission continue.|
Regulators are concerned that acquiring Quaker Oats and its dominant Gatorade sports drink brand would give the No. 2 U.S. soft drink maker an unfair advantage over other beverage makers.
"We have said all along it is in everyone's best interest to let the government investigate fully, and sometimes that process can take longer than anticipated," PepsiCo CEO Steven Reinemund said.
The companies previously said they expected the proposed $13.8 billion acquisition of Quaker (OAT: down $0.90 to $95.51, Research, Estimates) by PepsiCo (PEP: up $0.12 to $44.43, Research, Estimates) to close by the second quarter of 2001. Neither company provided a reason discussions with the FTC are being extended.
Asked specifically whether they expected the deal to close in the third quarter or later in the second half, spokesmen for both companies declined to comment.
PepsiCo spokesman Tod MacKenzie would say only, "Our best guess was that we would complete by the second quarter, but this dialogue is going to continue. We just recognized that we're getting toward the middle of June and recognized things are going to carry over beyond that. We thought we should just put out a note."
The transaction has already received a nod from European regulators.
On May 1, PepsiCo announced plans to divest its All Sport beverage unit in an effort to please regulators. Terms of the pending deal to sell All Sport to Atlanta-based Monarch Beverage Co. were undisclosed, MacKenzie said. Monarch owns Dad's Root Beer and Bubble-Up soft drinks.
PepsiCo, based in Purchase, N.Y., agreed last December to acquire Chicago-based Quaker Oats, ending a month-long courtship in which Quaker considered other suitors such as Coca-Cola Co. and France's Groupe Danone.
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The proposal calls for PepsiCo to swap 2.3 shares of its stock for each outstanding Quaker Oats share. In addition, Pepsi would assume $761 million in Quaker debt and would receive a $420 million breakup fee if Quaker pulls out in favor of another partner.