Rule Maker Coca-Cola (NYSE: KO), the world's largest soft drink company, confirmed this afternoon it's in talks with Quaker Oats (NYSE: OAT) regarding a possible purchase of the company.
News reports this morning said Coke has offered about $15 billion to acquire Quaker Oats, topping rival PepsiCo's (NYSE: PEP) bid of about $13.7 billion earlier this month.
Both Pepsi and Coke want to get their hands on Quaker Oats' Gatorade division, which has more than an 80% share of the sports drink market. Coke's PowerAde drink has 11% market share and Pepsi's All-Sport trails with 3.1%.
Coke isn't the only one interested in Gatorade. Reports indicate France's Groupe Danone (NYSE: DA) has made an offer, and that Pepsi may enter the fray once more.
In a statement, Coke CEO Doug Daft said, "Any agreement must be consistent with our strategic program and enhance our ability to increase value to our shareowners and our other constituents, as well as deliver value to consumers.''
Investors should hope so, since bidding wars for highly sought properties generally work out better for sellers than buyers. Think of Quaker Oats' purchase of Snapple juice brands in 1994 for about $1.7 billion. It turned around and sold it for about $300 million a few years later. This doesn't mean Coke will make the same operational missteps Quaker Oats made with Snapple, but investors should err on the side of caution when considering the soundness of acquisitions.
If Coke pays the estimated $116.70 per share takeover price, it will be paying about a 30% premium for the shares, which were already near a 52-week high from the Pepsi bid. Coke shares fell about 8% to $55 9/16 today.
A back of the envelope calculation shows that Quaker Oats has $4.99 billion in trailing 12-month sales, so at a price of $15 billion, Coke would be paying three times sales. Coke trades at about 7.4 times sales and Pepsi at about 3.2 times sales. Gatorade sales topped $1.8 billion last year.
And now for something completely different....
Today, I'm going to step back from the world of Rule Makers and talk about a way to make your financial life a little more convenient. We have a new service on the Fool called My Accounts, which aggregates all your financial accounts so that, on a single page, you can get a snapshot of all your balances. The setup process is a cakewalk -- expect 15-30 minutes. It's free, too. Just another benefit of being a Fool.
The problem is that we all have so many online accounts! These days, a consumer is lucky if he can count all his financial service providers on a single hand. Most of us need both hands and maybe even a foot to tally up the checking account, money market account, brokerage account or two, a company-sponsored 401(k), various loans, maybe a mortgage, and surely a Visa, a MasterCard, and an American Express card. It's a mess trying to keep up with the confusing array of account numbers, log-in names, and passwords associated with each account. My Accounts is the solution.
Here's how it works:
First, you fill out a basic registration form and create an ID and security key. (The My Accounts service uses its own ID and password system that's separate from your Fool.com registration, but may I recommend that for convenience you might want to choose the same ID and password as you have on the Fool. That's what I did, at least.)
Then, you're presented with a list of available accounts, including all major and many minor providers of the following services: banking, investments, telecom bills, email, reward programs, and credit cards. You pick as many accounts as are relevant to you, and then simply provide account numbers and passwords for each. That's it.
Once you have it set up, you'll be able to access a one-page snapshot of all your account info (updated once daily) from anywhere you have access to the Web. Also, from that one-page snapshot, you can then get more detailed info on your accounts, log in to the actual account, or click an "update" button to update the account info.
In case you're wondering about security, the My Accounts service -- powered by Vertical One software -- uses 128-bit encryption, Triple DES encryption, and exceeds the security standards used by banks and brokerages. Two of the Fool's top techies reviewed Vertical One's security and were satisfied with the precautions it takes in securing customer data.
I recently set up My Accounts for 10 of my own accounts, including my online bank, credit cards, brokerage account, company 401(k), and airline rewards programs. The service works like a charm. It's a great one-stop shop to see where my finances stand.
So, if you're ready to get rid of all your "secret" ID/password Post-it notes that are stuck all over your computer, I encourage you to stroll over to myaccounts.fool.com and give it a shot.
Fool on!
Matt Richey, TMF Verve on the Discussion Boards