UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
May 2, 2002 1-14893
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Date of Report (Date of Commission File Number
earliest event reported)
THE PEPSI BOTTLING GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-4038356
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Pepsi Way
Somers, New York 10589
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(Address of Principal Executive Offices) (Zip Code)
(914) 767-6000
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(Registrant's telephone number, including area code)
Item 5. Other Events.
On MAY 7, 2002, The Pepsi Bottling Group, Inc. ("PBG") issued a press
release announcing that it had reached a non-binding agreement with PepsiCo,
Inc. and Mr. Enrique C. Molina Sobrino ("Mr. Molina"), the two principal
shareholders of Pepsi-Gemex S.A. de C.V. ("Pepsi-Gemex"), regarding the possible
acquisition of all of the outstanding shares of Pepsi-Gemex. The press release
is filed as Exhibit 99.1 hereto, and is incorporated herein by reference. The
non-binding agreement is reflected in a term sheet, a copy of which is filed as
Exhibit 99.2 hereto, and is incorporated herein by reference. PBG and Mr. Molina
have entered into a confidentiality agreement, dated May 3, 2002, in which each
party agreed to keep confidential all non-public information of the other party
to which it is given access.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibit 99.1 Press release dated May 7, 2002.
Exhibit 99.2 Non-Binding Term Sheet.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 7, 2002 THE PEPSI BOTTLING GROUP, INC.
By: /s/ Pamela C. McGuire
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Pamela C. McGuire
Senior Vice President,
General Counsel and Secretary
Exhibit 99.2
Non-Binding Term Sheet
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SANTA FE TERMS AND CONDITIONS
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Proposal The Pepsi Bottling Group ("PBG") proposes to purchase
100% of the shares of Pepsi-Gemex, S.A. DE C.V.
(Gemex), including all shares subject to Gemex
options, through public tender offers in the United
States and Mexico.
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Gross Enterprise Value The gross enterprise value for Gemex will be, in the
aggregate, equal to 11,903,650,000 Mexican Pesos.
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Adjustments to Gross The peso equivalent of the gross enterprise value of
Enterprise Value Gemex ("EV") will be adjusted for (A) Working
Capital, (B) Net Debt, (C) Identified Due Diligence
Liabilities, and (D) Conduct of Business in the
Ordinary Course ("Adjusted EV") prior to calculating
the price per share to be offered to Gemex
shareholders in the Tender Offers. Any U.S. Dollar
denominated adjustments shall be converted into
Mexican Pesos calculated on the basis of the average
spot exchange rate for the 5 day period prior to the
commencement of the Tender Offers.
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Net Working Capital Immediately prior to the commencement of the Tender
Offers, the EV will be increased or decreased, on a
peso-for-peso basis, to the extent that the Net
Working Capital of Gemex on such date is greater or
less than a normalized level of Net Working Capital
agreed upon by Enrique Molina (the "Seller") and PBG.
Net Working Capital will be defined as accounts
receivable, inventories, prepaid expenses (but not
cash) less accounts payable and accrued expenses and
taxes payable (i.e. current assets, other than cash,
less current liabilities)
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Net Debt Immediately prior to the commencement of the Tender
Offers, the EV will be decreased, on a peso-for-peso
basis, to the extent that (A) the amount of all short
term debt and long-term indebtedness of Gemex,
including any premium resulting from any
change-in-control provision contained in such
indebtedness, (B) the amount of any current portion
of such indebtedness, and (C) any amounts due for
unpaid dividends declared minus any cash in the
business exceeds 0 Mexican Pesos.
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Identified Due Diligence PBG will undertake a comprehensive due diligence
Liabilities investigation and review and will quantify the any
amount of liabilities not included or reserved for in
the financial statements of Gemex used to determine
the EV. Immediately prior to the commencement of the
Tender Offers, the EV will be decreased, on a
peso-for-peso basis, in the amount of any such
identified liabilities.
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Conduct of Business in PBG will assess whether Gemex has conducted its
the Ordinary Course business in the ordinary course for the period
beginning on January 1, 2002 through the date
immediately preceding the commencement of the Tender
Offers and will quantify the impact of any failure to
conduct its business in the ordinary course. For
example, PBG will assess whether Gemex has made
investments in capital items (such as marketing
equipment) and expenditures for repairs and
maintenance on a basis consistent with reasonable
business judgment and past practice prior to January
1, 2002. Immediately prior to the commencement of the
Tender Offers, the EV will be decreased, on a
peso-for-peso basis, in the amount of such impact.
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Seller's Existing PBG acknowledges that the Seller is entitled to a
Pension and lump-sum payment of approximately 141,150,000 Mexican
Termination Benefits Pesos upon his resignation from Gemex.
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Tender Offer Price The price per share offered to Gemex shareholders
Per Share in the public Tender Offers will be calculated by
dividing the Adjusted EV minus 329,350,000 by the
number of Gemex shares outstanding. In addition the
shareholders of Gemex other than PepsiCo, Inc. will
receive an incremental amount equal to 329,350,000
divided by the number of Gemex shares outstanding
other than the shares held by PepsiCo. The Mexican
Tender Offer price per share will be denominated in
Mexican Pesos. The U.S. Tender Offer price per share
will be dnominated in U.S. Dollars equivalent to the
Peso denominated tender offer price per share,
calculated on the basis of the average spot exchange
rate effective for the 5 day period prior to the
commencement of the Tender Offers.
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Seller's Participation Seller will agree to participate in the Tender Offers
Agreement with respect to all shares owned by the Seller
directly or indirectly.
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Representations Seller will represent and warrant with respect to
and Warranties undisclosed liabilities of Gemex to companies and
individuals affiliated with Seller.
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2
Indemnity Seller will fully indemnify PBG for breach of any
such representations and warranties and will
reimburse PBG for the cost to terminate transactions
with affiliates that are on terms less favorable to
Gemex than arms-length transactions ("Affiliate
Termination Costs"). The Seller will deposit
188,200,000 Mexican Pesos from the proceeds of the
Tender Offers into an escrow account for purposes of
securing PBG's indemnification claims in respect of
Seller's representations and warranties (the "Escrow
Deposit"). The Escrow Deposit will be invested in
U.S. treasuries with appropriate maturities and shall
be paid out over a three year period, subject to
outstanding claims. Interest earned on the Escrow
Deposit will be payable to the Seller. Seller's
liability for breaches of representations and
warranties, indemnification obligations and liability
for Affiliate Termination Costs will be capped at the
amount of the Escrow Deposit.
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Timing/Due Diligence PBG will provide Gemex with a due diligence request
list as soon as practicable. PBG will use its best
efforts to complete its due diligence review within 8
weeks from the date on which PBG provides Gemex with
such list (assuming Gemex fully responds to the due
diligence request list within 1 week). The period of
due diligence review may be extended by mutual
agreement of the parties. The due diligence request
list will include items such as: (A) Human
Resources/Compensation and Benefits, (B) Risk
Management, (C) Real Estate, (D) Environmental, (E)
General Accounting, (F) Tax, (G) Information Systems,
(H) Cash Management Review, (I) Legal and (J)
Manufacturing and Warehousing.
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Transaction Costs Each party will bear the transaction costs and
transaction-related tax costs incurred by them.
Transaction costs will include but not be limited to
legal, tax, accounting and investment banking fees
and costs related to the Tender Offers.
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Conditions of Closing Due Diligence satisfactory to PBG, PBG Board of
Director approval, governmental approvals, no
Material Adverse Change, no material breach of
representations and warranties, etc.
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Confidentiality Seller and PBG agree that the information contained
in this term sheet is confidential and neither will
disclose it to anyone other than their respective
financial, legal, tax and accounting advisors who
also will keep the information confidential unless
otherwise required by law.
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May 7, 2002 3