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. Last Updated: 07/27/2016

Quaker Sells Snapple For Over $1Bln Loss

LOS ANGELES -- Closing one of the worst flops in corporate-merger history, Quaker Oats Co. has agreed to sell Snapple Beverage Corp. to Triarc Co. for $300 million, only 27 months after Quaker spent $1.7 billion to buy the maker of trendy drinks.


The Quaker-Snapple fiasco joins such ill-fated business marriages as AT&T Corp. and computer maker NCR, and General Electric Co. and defunct brokerage house Kidder, Peabody & Co.


But the swiftness by which Quaker's Snapple investment eroded will make this deal a special case study of mismanagement for a generation of business students.


"This has been a disaster," said analyst John McMillin of Prudential Securities Inc. in New York. He noted that Quaker's loss on the purchase means Quaker lost $1.6 million for each day it owned Snapple, which sells exotic juices and iced teas.


The mess at Snapple -- which virtually invented the market for "alternative" soft drinks and had sales of about $550 million last year -- also is an illustration of corporate hubris that ultimately harmed Quaker and its stockholders.


When Quaker bought Snapple in late 1994, many on Wall Street howled that the price was too high, perhaps $1 billion above what Snapple was worth. But Quaker Chairman William Smithburg -- who had turned sports-drink maker Gatorade into a smashing success after buying that business in 1983 -- was convinced he could do the same with Snapple, in part by meshing the ways in which Snapple and Gatorade were marketed.


The plan flopped for several reasons. The nation's thirst for such drinks became more sated and the market's growth eased just as Quaker bought the company. Huge rivals such as Coca-Cola and PepsiCo Inc. charged into the market with new products. Quaker struggled to exploit the merger of Gatorade, which is mostly sold in supermarkets, and Snapple, which typically is sold one bottle at a time in convenience stores.


The problems dragged down the total performance of Chicago-based Quaker, which had sales of $5.2 billion last year, and Quaker's stock price badly trailed the overall stock market.


Triarc is a New York-based company that owns the Arby's fast-food restaurant chain and several soft-drink brands, including Royal Crown and Diet Rite. It has also been selling its own brand of trendy drinks under the Mistic name.


Triarc is run by Nelson Peltz and Peter May, two financiers who rose to prominence in the 1980s by buying companies with the help of former junk-bond king Michael Milken.