Report: Quaker Holding Buyout Talks

Monday, November 20th 2000, 12:00 am

By: News On 6

NEW YORK (AP) â€” Just two weeks after rejecting a $14.8 billion acquisition offer from PepsiCo, Quaker Oats Co., the maker of Gatorade, reportedly has been in serious discussions with Coca-Cola Co. and France's Danone SA.

Quaker Oats' board of directors met over the weekend to discuss possible deals, with Coke emerging as the leading suitor, The Wall Street Journal and The New York Times first reported on their Web sites Sunday, citing people familar the matter.

Coke's board of directors is expected to meet Tuesday to discuss a possible transaction, although no formal offer has been made by either company, the Times and the Journal reported.

Spokesmen for both Coke and Quaker Oats on Sunday refused to comment on the reports, referring to them only as ``rumor and speculation.'' A Danone representative in Paris did not immediately return a phone call seeking comment.

Investors pushed Quaker Oats higher on the news, sending shares up $6.69 to $97 on the New York Stock Exchange. Coke shares fell $2.75 to $58.75, also on the NYSE.

Industry experts have said another bid is still possible by Pepsi and that other companies, including Nestle SA, could get into the apparent bidding war for Quaker Oats. Robert Morrison, head of Chicago-based Quaker had said Pepsi's offer was insufficient.

Despite struggling sales of its cold cereal brands, Quaker Oats has posted 11 straight quarters of double-digit profit gains thanks largely to Gatorade's more than 80 percent share of the sports beverage market in the United States. What began in the 1960s as a drink for sweaty jocks now accounts for more than 40 percent of company sales.

At one point last week, Coke and Quaker Oats were optimistic about announcing a deal on Sunday, but such hopes were dashed once Coke executives learned that officials at Quaker were also talking with France-based Danone, the Journal reported.

The Journal said Coke was considering a stock-swap that would have been valued higher than Pepsi's initial offer.

Another sticking point for Atlanta-based Coke is the potential for antitrust concerns arising from its ownership of Powerade, a weak rival to Quaker Oats' Gatorade.

Executives at Coke are also concerned about their ability to successfully absorb Quaker Oats' food divisions, which make such products as Rice-A-Roni, Life cereal and Aunt Jemima pancake syrup, the Times reported.

For Danone, which owns Evian and other major bottled water brands, a deal with Quaker Oats would give it a stronger foothold in the expanding U.S. market for non-carbonated beverages.

Danone is coming off of an unsuccessful acquisition effort earlier this year, when it made a joint bid with Cadbury Schweppes Plc to buy Nabisco Holdings Corp., but was beat out by Philip Morris Cos.

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On the Net:

http://www.quakeroats.com

http://www.cocacola.com

http://www.danone.com