PepsiCo IPO Plan Cheered

PepsiCo Inc. shares climbed 6 percent Friday afternoon after the beverage giant revealed it may spin off its vast bottling operations as a publicly held company.

Analysts have long touted the idea as a way to raise cash for the No. 2 soda company capital-intensive bottling arm, a move that would emulate the success that chief rival Coca Cola has had in Coca Cola Enterprises, which Coke spun off 12 years ago.

On the news, a series of analyst upgrades helped send the stock up 2 3/8, or 6.3 percent, to 39 15/16 on more than 9 million shares changing hands in afternoon trading. Donaldson, Lufkin & Jenrette and J.P. Morgan both raised their ratings on the stock to a "buy" from "market perform."

Announcing the IPO idea comes only days after PepsiCo said it will acquire Seagram's Tropicana juice unit, positioning the company to challenge Coke's Minute Maid brand.

"Structuring our bottling system to serve the needs of our retail customers and our shareholders is a critical part of our long-term growth strategy," Chairman Roger Enrico said in a statement released after the market closed Thursday. "The creation of a closely aligned, separately managed bottler of this size would help us pursue consolidation opportunities and improve our performance in the marketplace."

PepsiCo profited handsomely from its decision last year to sell to the public its restaurant holdings. Now known as Tricon Global Restaurants Inc., the separate company is the parent of Pizza Hut, Taco Bell and KFC.

But it's not certain that PepsiCo will go ahead with another spin-off - particularly in such an uncertain time for the IPO market, which has seen numerous deals make relatively meager debuts recent months. PepsiCo only said that it would consider the feasibility of converting "a significant portion" of its bottling assets.

Creating PepsiCo.'s largest bottler, an IPO would cover essentially all of PepsiCo's North American bottling facilities, and it also may include overseas plants, the company said.

Written By Alexander Davis