Pepsi Bottling Group Inc. |PBG
PepsiCo Inc. |PEP

Deal value $6.1 billion

Spread 04/27/09 -$2.46, or -7.9%

Risk arbitrageurs are betting PepsiCo Inc. will bump its offers to buy in PepsiAmericas Inc. and Pepsi Bottling Group Inc. PepsiCo has separate offers to buy in its two main North American bottling companies that manufacture and distribute Pepsi as well as other soda and non-soda products. PepsiCo owns about 43% of Pepsi­Americas and some 33% of Pepsi Bottling.

PepsiCo says the beverage industry has changed significantly in the decade since the independent bottlers were formed as it has shifted from carbonated soda domination. Pepsi says the buy-in of the bottlers will allow it to be nimbler in response to market demands. The offers hinge on the negotiation of a definitive agreement for each bottler, so both deals fall apart if either board seeks a higher price than PepsiCo is willing to pay.

Given ties between the bottlers and PepsiCo, both in ownership and product licensing, the bottlers would seem to have limited leverage in the negotiation. But PepsiCo has come out strong with the argument that it needs to buy the bottlers to respond effectively to the changing market environment, so it could be difficult for the company to back off that position.

Both buy-ins should get past antitrust regulators. PepsiCo says the deals are vertical combinations and it already has significant ownership stakes.

If the Federal Trade Commission takes issue, it will be whether by buying in the bottlers PepsiCo can foreclose on competing companies that have product moving through the manufacturing and distribution systems of either Pepsi Bottling or PepsiAmericas, an antitrust attorney said. Both companies distribute Dr Pepper, 7UP and Crush. According to the annual report for Dr Pepper Snapple Group Inc., 73% of Dr Pepper volume is distributed through either the Pepsi bottling system or that of the Coca-Cola Co.

CF Industries Holdings Inc. |CF
Agrium Inc. |AGU

Deal value $3.6 billion

Spread 04/27/09 $5.64, or 8.1%

Agrium Inc.'s offer for CF Industries Holdings Inc. received less than stellar support from CF Industries shareholders at their April 21 annual meeting. As a consequence, Agrium might have to again bump its offer for CF Industries, which has its own hostile bid for Terra Industries Inc.

Having missed the deadline to promote a dissident slate of directors to the CF Industries board, Agrium chose to solicit CF Industries shareholders to withhold votes for the company's slate.

CF Industries had three directors running for re-election at the annual meeting. Roughly 20% of CF Industries shareholders withheld votes for the CF Industries nominees.

Agrium says the 20% showing was 4 times the average withholding vote for S&P 500 companies and that the vote sends a message to the CF Industries board that its shareholders want it to engage in merger talks.

Both Agrium, for its CF Industries offer, and CF Industries, for its Terra offer, are repeatedly refiling for antitrust reviews, so neither can claim the other faces a second request delay.