Philip Morris Cancels Its Deal to Sell Seven-Up : Follows FTC Opposition to Purchase by Pepsico; Coke Still Seeks Dr Pepper

June 25, 1986|JUBE SHIVER Jr. | Times Staff Writer

Philip Morris Cos. announced Tuesday that it has canceled the agreement to sell its troubled Seven-Up Co. subsidiary to beverage giant Pepsico Inc. for $380 million.

The announcement came four days after the Federal Trade Commission said it would go to court to attempt to block that deal, as well as Coca-Cola Co.'s proposed $470-million purchase of Dr Pepper Co.

The two proposed soft-drink mergers would have put 80% of all U.S. soft-drink sales in the hands of the two industry giants--Coca-Cola and Pepsico. But competitors complained--and the FTC agreed--that it would unfairly limit competition in the $25-billion soft-drink industry.

Tuesday's announcement focused attention on likely purchasers of Seven-Up. "A lot of people are interested in Seven-Up, but it's just a matter of price," said Emanuel Goldman, an analyst for Montgomery Securities in San Francisco.

Coca-Cola Pursuing Plan

Philip Morris said it still wants to sell Seven-Up's franchise business. And there is widespread speculation that the cigarette maker may approach Pepsico with an offer to buy Seven-Up's overseas operations while it searches for a new buyer for Seven-Up's domestic business.

Meanwhile, Atlanta-based Coca-Cola said it would pursue its deal to buy Dr Pepper.

"We will continue our efforts regarding the proposed acquisition of the Dr Pepper Co.," spokesman Randy Donaldson said. He said those efforts "will involve getting prepared for the hearings before the administrative law judge at the FTC and in the Royal Crown suit."

The FTC voted 4 to 0 last Friday to seek a preliminary injunction against the proposed acquisitions by Coca-Cola and Pepsico. Also on Friday, Royal Crown Cola Co. obtained a temporary restraining order from a federal court in Georgia that blocked the acquisitions.

Philip Morris officials could not be reached for comment. But George Knox, a spokesman for Philip Morris, told the Associated Press that no one at the company "wants to discuss" why the company terminated its agreement with Pepsi.

When asked whether Coca-Cola's contract with Dr Pepper permits either party to opt out of their agreement, Donaldson said: "I don't know, but even if I did, I don't think we would comment on that one way or another."

Pepsico spokesman Jim Griffith said his company's agreement with Philip Morris gave Philip Morris "the right to terminate the agreement in the event the FTC ruled against us."

Griffith added that Pepsico was more disappointed with the FTC action than it was with Philip Morris' decision.

"We clearly thought we had the best chance to revitalize Seven-Up, which has been losing market share," Griffith explained. "And we think the acquisition would have stimulated competition and assured that Seven-Up was widely available to consumers at competitive prices."

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