PepsiCo Inc., Purchase, N.Y., announced that it has entered into an agreement to acquire Las Vegas-based Rockstar Energy Beverages for $3.85 billion.

"As we work to be more consumer-centric and capitalize on rising demand in the functional beverage space, this highly strategic acquisition will enable us to leverage PepsiCo's capabilities to both accelerate Rockstar's performance and unlock our ability to expand in the category with existing brands such as Mountain Dew," said PepsiCo Chairman and Chief Executive Officer Ramon Laguarta in a statement. "Over time, we expect to capture our fair share of this fast-growing, highly profitable category and create meaningful new partnerships in the energy space."

Rockstar, founded in 2001, produces beverages that are designed for those who lead active lifestyles from athletes to rock stars. Rockstar products are available in more than 30 flavors at convenience and grocery outlets in more than 30 countries. PepsiCo has had a distribution agreement with Rockstar in North America since 2009. In addition to Rockstar, PepsiCo's energy portfolio includes Mountain Dew's Kickstart, GameFuel and AMP.

"We have had a strong partnership with PepsiCo for the last decade, and I'm happy to take that to the next level and join forces as one company," said Russ Weiner, Rockstar's founder. "PepsiCo shares our competitive spirit and will invest in growing our brand even further. I'm proud of what we built and how we've changed the game in the energy space."

PepsiCo has also entered into an agreement, which will provide approximately $700 million of payments related to future tax benefits associated with the transaction, payable over up to 15 years. PepsiCo does not expect the transaction to be material to its revenue or earnings per share in 2020. The transaction is subject to customary closing conditions, including regulatory approval, and is expected to close in the first half of 2020.    

Centerview Partners LLC acted as financial advisor to PepsiCo. Gibson, Dunn & Crutcher LLP acted as lead counsel to PepsiCo, and Davis Polk & Wardwell LLP as U.S. tax and antitrust counsel. Goldman Sachs & Co. LLC acted as financial advisor to Rockstar, with King & Spalding acting as Rockstar's legal counsel.