UPDATE 1-PepsiCo wins EU approval to buy two bottlers

Tue Oct 27, 2009 6:46am EDT

* EU clears Pepsi Bottling, PepsiAmericas buys

* PepsiCo to pay &7.8 bln for the two deals

* PepsiCo says takeovers will help cut costs, boosts profits

(Adds details of PepsiCo's two acquisitions, background)

BRUSSELS, Oct 27 (Reuters) - U.S. soft drinks maker PepsiCo Inc (PEP.N) won European Union regulatory approval on Tuesday to buy bottlers Pepsi Bottling Group Inc PBG.N and PepsiAmericas Inc PAS.N, deals that will help it cut costs and boost profits.

PepsiCo, the second-largest soft drink maker in North America, announced the $7.8 billion deal in early August after running the bottlers as separate companies for the last 10 years.

The European Commission, the European Union's executive arm, cleared both deals, saying they would not impede competition in Europe though overlaps existed in the firms' businesses.

"As PAS (PepsiAmericas) was already bottling, selling and distributing PepsiCo beverages, it is unlikely that the transaction would lead to a significant change in the market structure," the EU competition watchdog said in a statement.

"The proposed transaction would not significantly change the market structure. Consequently, the Commission concluded that the transaction would not raise competition concerns," the Commission said regarding the Pepsi Bottling Group deal.

PepsiCo, whose drink brands include Mountain Dew, Tropicana and Gatorade, spun off the bottlers in 1999, following a similar move from top rival Coca-Cola Co (KO.N).

It is buying them back because the current model makes it difficult to achieve sustainable long-term profit growth since there is not enough profit in total to support investment in separate companies, PepsiCo has said.

Pepsi said at the time of the deal that it would pay $36.50 per share for Pepsi Bottling and $28.50 per share for PepsiAmericas, representing premiums of about 45 percent and 43 percent from the bottlers'.

(Reporting by Bate Felix, editing by Dale Hudson)

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