It’s not about the takeover chatter that more often than not proves bogus. Investors should buy into a company only if they think it will eventually be worth more on its own.
SodaStream once again proved its ability to thrive as a swinging single on Monday. Whirlpool Corporation (NYSE:WHR) teaming up with SodaStream to jointly develop a carbonation system is a pretty big deal. It’s a brand stretcher. It’s validation. It’s a win-win move.
However, shares of Sodastream International Ltd (NASDAQ:SODA) somehow closed lower on the news. The stock closed lower yesterday, too, despite the Oppenheimer analyst move.
It’s pretty clear what’s happening. Speculators who hopped on expecting a PepsiCo, Inc. (NYSE:PEP) buyout at $95 earlier this month are moving on.
It’s only fair. Sodastream International Ltd (NASDAQ:SODA)’s shares soared 14% through the first two weeks of the month almost entirely on reports out of Israel claiming that PepsiCo had made a $2 billion buyout offer. The actual fundamentals at SodaStream never really improved at that time. Now that we’re seeing legitimate catalysts in the form of an analyst’s improving view and a partnership with a major appliance maker that’s being offset by the selling that follows deflated buyout buzz.
PepsiCo, Inc. (NYSE:PEP) was never going to buy SodaStream. Why would it? Why would it anger its bottlers and confuse consumers by advocating a model that would destroy its overall profitability?
No one should be surprised if someone does buy Sodastream International Ltd (NASDAQ:SODA). It just won’t be PepsiCo. That rumor was insane.
Soda suitors
Who would make more sense as a potential suitor? I’m glad you asked. I’ll go over three companies that would be far more realistic buyers, though naturally I’m not under the impression that any of these giants will go through with a deal.
Let’s start with Whirlpool Corporation (NYSE:WHR). The company behind major Maytag appliances and smaller KitchenAid appliances wouldn’t be putting out a “Powered by SodaStream” home-based beverage maker if it didn’t see the potential.
Whirlpool Corporation (NYSE:WHR) is also hungry for growth. Sales fell last year and should be flattish in 2013. Despite the housing boom that would seem to benefit Maytag appliances, growth just isn’t happening. Sodastream International Ltd (NASDAQ:SODA) would be too small to move the needle for a company with more than $18 billion in sales, but this could also be a way to diversify geographically.
More than half of Whirlpool’s sales came from North America in its latest quarter. Add in Latin America and we’re talking about more than 80% of Whirlpool’s business. SodaStream is growing quickly in North and South America, but that’s just 41% of its revenue. SodaStream’s biggest market remains Western Europe. Buying SodaStream could be an important step in Whirlpool growing its global footprint.
Kraft Foods Group Inc (NASDAQ:KRFT) and Campbell Soup Company (NYSE:CPB) are the other two buyers that make sense. They already have working relationships with SodaStream.
Kraft Foods Group Inc (NASDAQ:KRFT) kicked things off more than a year ago when it moved to team up with SodaStream to put out Crystal Light diet drinks and Country Time lemonade as carbonated flavors. The relationship was promising enough that a few months later it added Kool-Aid to the line of SodaStream beverages.
Campbell Soup has only provided its V8 Splash and V-Fusion product lines as Sodastream International Ltd (NASDAQ:SODA) flavors, but Campbell is a serial acquirer. Revenue grew 15% in its latest quarter, but organic growth only clocked in 4% higher. Campbell Soup Company (NYSE:CPB) isn’t stopping. It has acquired two more companies since last month.
SodaStream would provide far more growth than Campbell Soup Company (NYSE:CPB) and Kraft Foods Group Inc (NASDAQ:KRFT) are doing organically in the low single digits, and they also have the distribution muscle to increase SodaStream’s presence at the supermarket level, where the company’s just starting to get its carbonated feet wet.
Will Whirlpool, Kraft, or Campbell actually buy SodaStream? They can. All three companies command market caps well north of $10 billion. However, they probably won’t, and that would be the best thing for Sodastream International Ltd (NASDAQ:SODA) investors.
As this week’s Whirlpool deal shows, SodaStream is just starting to get busy with the fizzy.
The article 3 SodaStream Suitors That Make Sense originally appeared on Fool.com and is written by Rick Munarriz.
Longtime Fool contributor Rick Munarriz owns shares of SodaStream. The Motley Fool recommends and owns shares of PepsiCo and SodaStream.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
