NEW YORK (CNNfn) - The Federal Trade Commission's staff attorneys are recommending that the regulators vote to block PepsiCo's $13.8 billion acquisition of Quaker Oats Co., a person familiar with the situation told CNNfn.com Thursday.|
The staffers fear that PepsiCo's acquisition of Gatorade would create a monopoly, the source said. Quaker's popular Gatorade brand has an 80 percent share of the sports drink market.
"This would imply that no one could buy Quaker," the person said.
However, the staff attorneys' recommendation is not definitive. The FTC has not made any decision on the purchase, an FTC spokeswoman said.
"This is an ongoing investigation," the spokeswoman said, who declined to comment further.
"We have refrained from commenting on our discussion with the FTC and don't plan to begin now," PepsiCo spokesman Richard Detwiler said. "We have been in discussions with the FTC and continue to be in discussions."
A Quaker spokesman declined to comment.
News of the regulatory hurdle had little impact on Quaker (OAT: down $0.82 to $86.97, Research, Estimates) or PepsiCo (PEP: down $0.52 to $46.47, Research, Estimates) shares, both of which dropped marginally.
In December, PepsiCo agreed to buy Quaker Oats Co. for $13.4 billion in stock, ending a month-long courtship.
In June, Quaker Oats Co. and PepsiCo Inc. said their proposed merger would be delayed at least until the third quarter as discussions with the FTC 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.
Recommendations from the FTC staff attorneys could lead to a court battle, a source said Thursday. There are five FTC commissioners, but newly appointed Chairman Timothy Muris, a Bush appointee, has recused himself because of a conflict of interest.
Of the remaining four commissioners, two are Democrats and two are Republicans. If they split, the FTC could ask for additional time and PepsiCo and Quaker could choose to proceed with their merger, a source said. But if the FTC ultimately decides against the acquisition they can sue, a source said.
The FTC decision is not expected for two to three weeks, the source said.