PepsiCo has sold its bottling operations in China to Tingyi (Cayman Islands) Holding Corp in exchange for a stake in the noodle and soft drinks maker’s business.

In an announcement to the Hong Kong stock exchange today (4 November), Tingyi said it has purchased PepsiCo’s entire soft drinks bottling business in China in exchange for a 9.5% interest in its beverage unit. PepsiCo will also have the option to increase this to 20% by 2015 on a fully diluted basis.

Under the deal, Tingyi’s beverage subsidiary, Tingyi-Asahi Beverages Holding Co Ltd (TAB), will become PepsiCo’s franchise bottler in China. TAB’s products include ready-to-drink tea, bottled water and juice beverages.

PepsiCo currently operates its China beverage business through 24 company-owned and joint venture bottling operations.

Upon approval of the transaction, PepsiCo will transfer its indirect equity interests in the bottlers to TAB, in return for a 5% indirect equity interest in TAB.

In a separate statement, PepsiCo said that the shareholdings of its existing Chinese joint-venture partners in the new bottling operations will not change as a result of the transaction.

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As part of the new alliance, TAB will partner with PepsiCo’s current bottlers to manufacture, sell and distribute PepsiCo’s CSD and Gatorade brands in China. PepsiCo will retain branding and marketing responsibilities in the country.

TAB will also begin co-branding its juice products under the Tropicana brand name under a license from PepsiCo. In addition, PepsiCo will provide access to its global beverage innovation pipeline.