Celsius Holdings stock surges as Pepsi takes a stake
lowkick/iStock via Getty Images

Celsius Holdings (NASDAQ:CELH) shares gained sharply on Monday after the company announced it had inked a deal with PepsiCo (PEP) for both a long-term distribution agreement and a major investment in the company.
Per the terms, PepsiCo (PEP) will take control of the energy drink companyâs U.S. distribution and will nominate a director to serve on Celsius' Board of Directors. Additionally, Pepsi (PEP) will make a net cash investment of $550M to Celsius in exchange for convertible preferred stock, equating to an estimated 8.5% ownership in Celsius on an as-converted basis. Those shares, priced at $75 per share, are entitled to a 5% annual dividend, according to the agreement.
"We believe the opportunity to partner with a global best-in-class distributor provides Celsius with significant near-term additional shelf space in both existing retailers as well as new expansion within the independent retailers that represent a significant portion of the U.S. convenience and gas channel where approximately 70% of energy drinks are sold,â Celsius CEO John Fieldly said. âIn addition, this partnership will drive efficiencies allowing our teams to consolidate sales, marketing, and distribution efforts with associated cost benefits, which we expect to recognize once the initial transition is completed."
Shares of Celsius rose by over 18% at the intraday high, taking the stock price into the triple-digits. The move extends a nearly 60% gain for the name in just the past month and significant outperformance for the stock in the past six months.

Celsius (CELH) had previously been floated as a takeover target for Pepsi (PEP) by Stifel analyst Mark Astrachan. In June, Astrachan had suggested the termination of PepsiCoâs (PEP) distribution agreement with Bang Energy could cause the beverage giant to seize on opportunities like Celsius.