Pepsi sues PBG over poison-pill tactics

12 May 2009

The world's second- largest soft-drink maker, Pepsi Co has sued its bottler, the Pepsi Bottling Group (PBG), the world's largest manufacturer, seller and distributor of Pepsi-Cola beverages for its poison pill defence against the soft drink makers' proposed acquisition.

Pepsi filed a lawsuit in Delaware yesterday against PGB and certain board members for intentionally holding a board meeting without giving notice to all the directors of the PGB board and adopted a "poison pill," implemented certain new executive compensation packages and purported to amend the PBG bylaws in ways Pepsi believes are detrimental to its rights as a shareholder.

Since Pepsi is a majority shareholder in PGB by virtue of it's 33.1-per cent stockholding, it has two directors on the board of PGB. Both these directors were not informed about the board meeting called by PGB last week.

In the suit, Pepsi alleges, ''PBG and its board breached their fiduciary duties to PBG shareholders by adopting a shareholder rights plan, commonly referred to as a "poison pill," because it restricts Pepsi's rights as a PBG shareholder and constitutes an unreasonable and disproportionate response to Pepsi's constructive proposal.''

The suit seeks declaratory and injunctive relief.

On April 19, 2009, PepsiCo had offered to acquire all of the outstanding shares of common stock that it does not already own in its two largest anchor bottlers, Pepsi Bottling Group (PBG) and PepsiAmericas in its two largest anchor bottlers for a combined $6 billion. (See: Pepsi offers to buy out its two bottlers for about $6 billion)