• PepsiCo has agreed to sell Tropicana, Naked and other North American juice brands for pretax cash proceeds of $3.3 billion.
• Pepsi will also receive a 39% stake in a newly formed joint venture with buyer PAI Partners, a French private equity firm.
• Pepsi said it will use the proceeds to strengthen its balance sheet and invest back in its business.

PepsiCo announced Tuesday it has agreed to sell Tropicana, Naked and other North American juice brands to a French private equity firm.

The deal with PAI Partners will net pretax cash proceeds of $3.3 billion for Pepsi. The food and beverage giant will also receive a 39% stake in a newly formed joint venture with PAI and the exclusive U.S. distribution rights for the juice brands for certain channels, like food service.

"This joint venture with PAI enables us to realize significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands," Pepsi CEO Ramon Laguarta said in a statement.

PAI will also have the irrevocable option to buy certain Pepsi juice businesses in Europe.

The transaction is expected to close in late 2021 or early 2022. Pepsi said it will use the proceeds from the sale to strengthen its balance sheet and invest back in its business.

In 2020, the brands involved in the deal generated about $3 billion in revenue for Pepsi but trailed the company's overall operating margin. Pepsi reported net sales of $70.37 billion in 2020.

"In part, the news of Tropicana and Naked reflects the uncertain role of fruit juice in the consumer's routine long term and the ongoing concern about sugar, particularly in North America where Tropicana is largest," said Howard Telford, head of soft drinks at Euromonitor International. "While the category in the U.S. enjoyed a boost in off-trade sales in 2020, with consumers seeking more vitamin C for immune support, the long-term trend has been one of decline."

Many food and beverage businesses, including rival Coca-Cola, have spent the last year and a half trimming their portfolios as a response to the pandemic. In some cases, like Nestle's sale of its North American water business, cash-laden private equity firms rather than rival food or beverage companies have snapped up the brands on the auction block.

Shares of Pepsi have risen 5% this year, giving it a market value of $216 billion. The stock rose less than 1% in premarket trading on the news. In its latest quarter, the company saw its quarterly revenue soar more than 20% as restaurant demand for its drinks returned.