Pepsi 2009 Annual Report Download - page 55

43PepsiCo, Inc. 2009 Annual Report
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 condi-
tions that could have a material adverse effect on us.
Completion of each of the Mergers is conditioned upon the receipt
of certain governmental clearances or approvals, including, but not
limited to, the expiration or termination of the applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvement Act of
1976 (the HSR Act) with respect to such Merger. There can be no
assurance that these clearances and approvals will be obtained, and,
additionally, government authorities from which these clearances
and approvals are required may impose conditions on the completion
of the PBG Merger or the PAS Merger or require changes to their
respective terms. While under the terms of the Merger Agreements,
neither we nor PBG or PAS is required, in connection with the PBG
Merger or the PAS Merger, as applicable, to enter into any agree-
ment or other undertaking with any such governmental authority
with respect to any of our respective or our respective material
subsidiaries’ material businesses, assets or properties, we, PBG and
PAS have each agreed to use reasonable best efforts to obtain
governmental clearances or approvals necessary to complete the
applicable Merger. If, in order to obtain any clearances or approvals
required to complete either the PBG Merger or the PAS Merger, we
become subject to any material conditions after completion of the
PBG Merger or PAS Merger, as applicable, our business and results
of operations after completion of the PBG Merger or PAS Merger,
as applicable, may be adversely affected. In addition, there can
be no assurances that the Commissioners of the Federal Trade
Commission (FTC) will approve the consent decree (Consent
Decree) we signed that was proposed by the Staff of the FTC. If the
Commissioners do not approve the Consent Decree, the Mergers
could be prevented or delayed.
Following completion of the Mergers, a greater portion of
our workforce will belong to unions. Failure to successfully
renew collective bargaining agreements, or strikes or work
stoppages could cause our business to suffer.
Over 25% of current PBG and PAS employees are covered by collective
bargaining agreements. These agreements expire on various dates.
Strikes or work stoppages and interruptions could occur if we are
unable to renew these agreements on satisfactory terms, which could
adversely impact our operating results. The terms and conditions of
existing or renegotiated agreements could also increase our costs
or otherwise affect our ability to fully implement future operational
changes to enhance our efficiency after completion of the Mergers.
Any downgrade of our credit rating could increase our
future borrowing costs.
Following the public announcement of the PBG Merger Agreement
and the PAS Merger Agreement (as defined in “Acquisition of Common
Stock of PBG and PAS”), Moody’s Investors Service (Moody’s) indicated
that it was reviewing our ratings for possible downgrade. Moody’s
has noted that the additional debt involved in completing the
Mergers and our consolidated level of indebtedness following
completion of the Mergers could result in a rating lower than the
current rating level. Also following the public announcement of
the PBG Merger Agreement and the PAS Merger Agreement,
Standard & Poor’s Ratings Services (S&P) indicated that its outlook
on PepsiCo was negative and it could lower our ratings. S&P has
indicated that when additional information becomes available S&P
will review whether, following completion of the PBG Merger and
the PAS Merger, any of our senior unsecured debt will, in S&P’s view,
be structurally subordinated, which could result in a lower rating
for PepsiCo’s debt securities. A downgrade by either Moody’s or
S&P could increase our future borrowing costs.
Forward-Looking and Cautionary Statements
We discuss expectations regarding our future performance, such as our
business outlook, in our annual and quarterly reports, press releases, and
other written and oral statements. These “forward-looking statements”
are based on currently available information, operating plans and
projections about future events and trends. They inherently involve risks
and uncertainties that could cause actual results to differ materially
from those predicted in any such forward-looking statements. Investors
are cautioned not to place undue reliance on any such forward-looking
statements, which speak only as of the date they are made. We
undertake no obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise. The
discussion of risks below and elsewhere in this report is by no means all
inclusive but is designed to highlight what we believe are important
factors to consider when evaluating our future performance.
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