Tropicana Products Inc (“Tropicana”) was founded in Florida in 1947 by Anthony Rossi. Over time, Tropicana grew to be the leader of the refrigerated orange juice market. In 1998, PepsiCo bought the business from Seagram for $3.3B. Since the acquisition, PepsiCo has been competing with Coca Cola. 

In order to generate the upfront cash from the asset and retain upside from the joint venture, in August 2021, PepsiCo decided to sell Tropicana, Naked and other juice brands to PAI Partners for $3.3 billion while retaining the 39% stake and exclusive US distribution rights.

With consumer trends slowly moving to healthier beverages, PepsiCo seized the opportunity and sold sugary juice brands, such as Tropicana and Naked, to PAI Partners for $3.3 billion. PepsiCo managed to use this capital to pay off some debt, as well as invest in fast-growing industry of healthier products. PepsiCo also retained the 39% stake which will allow the company to share the upside of the joint venture. In 2016, PAI Partners, the private equity company from France, partnered with Nestle to create a joint venture which has become the second largest ice cream company in the world. Based on PAI Partners' experience in the ice cream business, PepsiCo made a decision to structure a similar deal with PAI Partners in the juice business.

The PAI Partners/Pepsico deal is a great example of how private equity investors can find value in a company's non-strategic asset, and unlock the value through unique structuring, as well as adding their previous experiences. Investors should always be creative and open minded when looking for deals. There might be companies with divisions that no longer align with their long term goal. As companies grow, their priorities and goals often change and might create a window of opportunities, for both the buyer and the seller.