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Dr Pepper Completes PepsiCo Licensing Deal

Friday, 26 Feb 2010 03:17 PM

PepsiCo Inc. has paid Dr Pepper Snapple Group Inc. $900 million as part of the process of buying Pepsi's bottlers and taking over their agreements with beverage companies.

Dr Pepper said Friday that it completed the licensing deal with PepsiCo and received the one-time payment, which it will record as net sales over the deal's 20-year term.

The agreement allows PepsiCo to distribute Dr Pepper, Crush and Schweppes in parts of the U.S. where PepsiCo bottlers used to distribute them. The two companies made similar deals for certain Dr Pepper brands in Canada and Mexico.

Finalizing the agreement now rests on PepsiCo closing the $7.8 billion deal to buy its two biggest bottlers, Pepsi Bottling Group and PepsiAmericas.

PepsiCo said Thursday that it had cleared the final regulatory hurdle and expected to close the bottler deal after the market closes on Friday.

The Federal Trade Commission said Friday it has approved PepsiCo Inc.'s proposal to buy its two biggest bottlers, with the restriction that it limit its access to information about Dr Pepper Snapple, now that the two will work together on distribution.

Under the FTC's condition, PepsiCo must restrict its access to confidential business information about Dr Pepper Snapple and set up a "firewall" to make sure PepsiCo employees will not see commercially sensitive information about Dr Pepper such as marketing and branding plans.

The FTC said access to such information would hurt competition in the U.S. soft drink market and lead to possible "coordinated interaction in the industry."

In some parts of the U.S., Dr Pepper Snapple Group will begin selling its own Sunkist, Squirt, Vernors and Hawaiian Punch, which used to be distributed by the two Pepsi bottlers.

Dr Pepper used part of the $900 million to pay down debt. Its remaining outstanding debt is about $2.55 billion.

Dr Pepper Snapple is based in Plano, Texas. Its shares were trading down 23 cents to $31.60 Friday afternoon.

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PepsiCo Inc. has paid Dr Pepper Snapple Group Inc. $900 million as part of the process of buying Pepsi's bottlers and taking over their agreements with beverage companies.Dr Pepper said Friday that it completed the licensing deal with PepsiCo and received the one-time...
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