Dud: Quaker and Snapple
I hate to go so far back, but this one is epic. Quaker, now part of PepsiCo (PEP), acquired Snapple in December 1994 for $1.7 billion, paying 28.6 times earnings and 3.3 times sales. The plan was to combine Gatorade with Snapple in a single beverage-related division.
Unfortunately, distributors didn’t want to give up some of their Snapple business in return for some Gatorade sales. Nothing Quaker was trying to implement at Snapple was moving nearly fast enough. In 1995, it lost $75 million — the worst loss in Snapple history. Businessweek called it one of the worst mergers of the 1990s.
By 1997, Quaker had seen enough, selling Snapple to Nelson Peltz’s Triarc Companies for $300 million. Three years later, Triarc sold Snapple to Cadbury Schweppes — now part of Dr Pepper Snapple Group (DPS) — for $1.45 billion. Interestingly, Cadbury Schweppes had originally passed on Snapple in 1997 because it felt $300 million for too much for the drink maker. Bill Smithburg, the Quaker CEO when the Snapple debacle went down, resigned from the company in November 2000 after PepsiCo agreed to purchase Quaker for $13.4 billion.
How much did Snapple cost Quaker Oats? Businessweek estimates it might have been as high as $1.5 billion when you take into account the profitable brands that were sold to pay for the deal. Sometimes, a deal sounds good on paper, but ends up being utter crap.