November 04, 2000|By BLOOMBERG NEWS
CHICAGO - Quaker Oats Co. shares rose 9 percent yesterday on expectations that the company will receive more takeover offers, after published reports said the maker of Gatorade rejected a $14 billion bid from PepsiCo Inc.
While either PepsiCo or rival Coca-Cola Co. could use its marketing muscle to boost sales of Gatorade, some analysts identified Nestle SA as a more likely buyer because of its interest in Quaker's foods. Quaker's other products range from oatmeal to Cap'n Crunch cereal to Aunt Jemima syrup.
It's the spiraling success of 35-year-old Gatorade that has made Quaker a prime takeover candidate. Gatorade has a commanding 84 percent share of the sports-drink market and is one of the fastest-growing products in U.S. grocery stores, analysts said.
"Quaker Oats has one of the all-time great businesses in Gatorade," said Tom Russo of Gardner Russo Gardner Investments, which holds Quaker Oats shares.
Quaker shares rose $7.44 yesterday to a record $89.69. PepsiCo shares fell $1.25 to $45.81.
Gatorade generates about 40 percent of Quaker's annual sales and profit. The beverage's sales at grocery stores surged about 15 percent during the past 12 months, far outpacing the food industry's 1 percent to 2 percent rise.
Gatorade would be a good fit for either PepsiCo or Coca-Cola, analysts said. Both companies have tried to make inroads against Gatorade, with limited success. Coca-Cola's PowerAde has captured 11 percent of the sports-drink market, and PepsiCo's All Sport has about 3 percent.
PepsiCo, the second-biggest soft-drinks company, offered to exchange 2.2 shares for each Quaker share, the Wall Street Journal reported, citing unnamed people. That valued Quaker at $103.53 a share, 26 percent more than yesterday's close. Quaker rejected the bid as too low, and talks ended, the paper said.
Quaker Oats spokesman Mark Dollins and PepsiCo spokesman Richard Detwiler both declined to comment. Coca-Cola spokesman Rob Baskin and Nestle spokesman Marcel Rubin both declined to comment on whether their companies would submit bids for Quaker.
Quaker's shares already had soared 25 percent this year on takeover speculation, prompting some analysts to cut their ratings to "hold" from "buy." Only two out of nine analysts who follow the stock still have "buy" recommendations on it.
