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Varun Beverages to acquire PepsiCo’s franchisee rights in two states
Photo Credit: Reuters

Varun Beverages Ltd said on Wednesday its board has approved a plan to acquire PepsiCo India’s previously franchised territories in Odisha and parts of Madhya Pradesh along with three manufacturing units.

Upon completion of this acquisition, Varun Beverages will be a franchisee for PepsiCo products across 18 states and two union territories, the company said in a statement.

The three plants are at Cuttack and Bargarh in Odisha and Mandideep in Madhya Pradesh, it said. The deal is subject to completion of due diligence and final approval of PepsiCo, it added. It didn't give any financial details.

Varun Beverages chairman Ravi Jaipuria said the proposed deal is part of the company’s strategy to consolidate its presence in contiguous territories and garner market share.

“These are highly under-penetrated markets which offer long-term, sustainable growth opportunities.

Further, the manufacturing facilities are strategically located close to target markets which will reduce time to market and enable optimization of freight and logistics costs, aiding margin expansion,” he said.

A person familiar with the matter said Varun Beverages is buying the franchisee rights from SMV Beverages Pvt. Ltd, which is controlled by Ravi's brother Surya Kant Jaipuria.

Varun Beverages is one of the largest franchisees in the world (outside the US) of carbonated as well as non-carbonated beverages sold under brands owned by PepsiCo.

The company produces and distributes beverages such as Pepsi, Diet Pepsi, Seven-Up, Mirinda Orange, Mirinda Lemon, Mountain Dew, Tropicana Slice and Nimbooz as well as packaged drinking water under the brand Aquafina. In addition, it has the franchise for the Ole brand of PepsiCo products in Sri Lanka.

The company counts AION Global, the special situation investment firm jointly run by Apollo Global and ICICI Venture, and Standard Chartered Private Equity as investors. It made a tepid debut on the stock markets last November.

*This article has been modified based on additional information.

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