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. Last Updated: 07/27/2016

Pepsi Seen Closing In on Juice Giant

Itar-TassA technician working at Lebedyansky's plant in the Lipetsk region. The firm's shares rose 11 percent early Monday.
Reports that PepsiCo was set to buy a 76 percent stake in Lebedyansky caused a sharp spike in share prices Monday for the country's largest juice maker.

The deal, estimated to be worth at least $1.5 billion, would be the largest ever in the Russian juice sector and value the company at about $96 per share, Kommersant reported Monday, citing sources close to the proposed deal.

Shares in Lebedyansky initially leapt by around 11 percent on the MICEX, to just under 2,701 rubles ($106), the highest single rise in the past year.

But UralSib chief consumer analyst Andrei Nikitin said PepsiCo would most likely have to pay a hefty premium for the stake, raising the asking price to $115 per share.

Rumors of a possible deal first surfaced in November. Shares in Lebedyansky have climbed by around 25 percent in value over the last two months. The final deal could be announced by as early as September, Kommersant said, citing a Lebedyansky executive and a banker working on the deal.

Alexander Kostikov, head of public relations at Lebedyansky, refused to comment on the market rumors.

Alexander Shalnev, government and corporate affairs director at PepsiCo in Russia, also declined to comment.

Thirty percent of Lebedyansky is currently owned by State Duma Deputy Nikolai Bortsov, with his son Yury owning another 25 percent of the company. Board members Olga Belyavtseva and Dmitry Fadeyev own 18.4 percent and 2 percent respectively. The company makes well-known brands that include Fruktovy Sad, Ya and Tonus. Last year, the firm's total revenues rose to just over $700 million.

Although Lebedyansky was the obvious target for any international companies looking to break into the Russian market, Nikitin still expressed surprise at the mooted deal.

"It takes two to tango, and I don't think that Lebedyansky shareholders are that interested in selling their stakes," he said.

As Russia's consumer market booms, analysts argued that it was high time for PepsiCo to step up its interests in the country.

"We have always argued that PepsiCo has to increase its presence in the Russian juice market and clearly Lebedyansky ... would be the most obvious target," Deutsche Bank said in a note to investors Monday.

According to UralSib forecasts, revenues in the Russian juice sector are set to grow by an average of 16 percent per year over the next five years.

Talk of PepsiCo's move comes just one week after London-based private equity firm Lion Capital struck a deal to buy a stake in Nidan Soki, the country's third largest juice company.

UralSib's Nikitin said initial speculation had been that Lion Capital would eventually sell its stake in Nidan on to PepsiCo.

A spokesperson for Lion Capital refused to comment on the speculation Monday.

If the deal with Lebedyansky materializes, it would be coming hot on the heels of PepsiCo's acquisition in June of Ukrainian juice company Sandora for almost $550 million.

PepsiCo has a long history of involvement in Russia. In 1972, the company signed a deal to make and distribute Pepsi-Cola in the Soviet Union. In exchange, PepsiCo was given a monopoly on the distribution rights for Russian vodka in the United States.