Pepsi 2009 Annual Report Download - page 54

42 PepsiCo, Inc. 2009 Annual Report
Management’s Discussion and Analysis
RISKS RELATING TO THE MERGERS
Failure to complete the PBG Merger and the PAS Merger
may adversely affect our results of operations and prevent
us from realizing the full extent of the benefits and cost
savings expected from either or both of the PBG Merger
and the PAS Merger.
The PBG Merger and the PAS Merger are each subject to the
satisfaction or, to the extent permissible, waiver of certain
conditions, including, but not limited to, receipt of the necessary
consents and approvals. Although we expect to complete both
of the Mergers, it is possible that either the PBG Merger or the PAS
Merger may not be completed. Our relationship with PBG or PAS
may suffer following a failure to complete the PBG Merger or the
PAS Merger, as applicable, which could adversely affect our results
of operations. Failure to complete either Merger will also prevent
us from realizing the full extent of the benefits and cost savings
that we expect to realize as a result of the completion of both
Mergers. See also “The Mergers are subject to the receipt of certain
required clearances or approvals from governmental entities that
could prevent or delay their completion or impose conditions that
could have a material adverse effect on us.”
After completion of the Mergers, we may fail to realize
the anticipated cost savings and other benefits expected
therefrom, which could adversely affect the value of our
common stock or other securities.
The success of the Mergers will depend, in part, on our ability
to successfully combine our business with the businesses of PBG
and PAS and realize the anticipated benefits and cost savings from
such combination. While we believe that these cost savings estimates
are achievable, it is possible that we will be unable to achieve these
objectives within the anticipated time frame, or at all. Our cost savings
estimates also depend on our ability to combine our business with
the businesses of PBG and PAS in a manner that permits those cost
savings to be realized. If these estimates turn out to be incorrect or
we are not able to combine our business with the businesses of
PBG and PAS successfully, the anticipated cost savings and other
benefits, including expected synergies, resulting from the Mergers
may not be realized fully or at all or may take longer to realize than
expected, and the value of our common stock or other securities
may be adversely affected.
Specifically, issues that must be addressed in integrating our
operations with the operations of PBG and PAS in order to realize
the anticipated benefits of the Mergers include, among other things:
• integrating the manufacturing, distribution, sales and
administrative support activities and information technology
systems among the companies;
• motivating, recruiting and retaining executives and key
employees;
• conforming standards, controls, procedures and policies,
business cultures and compensation structures among
the companies;
• consolidating and streamlining corporate and administrative
infrastructures;
• consolidating sales and marketing operations;
• retaining existing customers and attracting new customers;
• identifying and eliminating redundant and underperforming
operations and assets;
• coordinating geographically dispersed organizations; and
• managing tax costs or inefficiencies associated with integrating
our operations following completion of the Mergers.
Delays encountered in the process of integrating our business
with the businesses of PBG and PAS could have an adverse effect
on our revenues, expenses, operating results and financial condition
after completion of the Mergers. Although significant benefits, such
as increased cost savings, are expected to result from the Mergers,
there can be no assurance that we will realize any of these antici-
pated benefits after completion of either or both of the Mergers.
Additionally, significant costs are expected to be incurred in
connection with consummating the Mergers and integrating the
operations of the companies, with a significant portion of such
costs being incurred through the first year after completion of the
Mergers. We continue to assess the magnitude of these costs and
additional unanticipated costs may be incurred in the integration
of our business with the businesses of PBG and PAS. Although
we believe that the elimination of duplicative costs, as well as the
realization of other efficiencies related to the integration of the
businesses, will offset incremental transaction and merger-related
costs over time, no assurances can be given that this net benefit
will be achieved in the near term, or at all.
Furthermore, the Mergers, and the related integration efforts,
could result in the departure of key employees or distract manage-
ment and employees from delivering against base strategies and
objectives, which could have a negative impact on our business, and,
prior to the completion of the Mergers, the businesses of PBG or PAS.
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