SodaStream has been the focus of controversy in the Middle East. Protesters claimed victory when the company closed a factory in the West Bank in 2014, which the opponents said was part of Israel's illegal occupation of the territory.
PepsiCo, which owns brands including Tropicana, Walkers and Doritos, said it had agreed to acquire all of SodaStream's outstanding shares at $144 (£112) each. The offer represents an 11% premium to the Friday closing price of SodaStream's USA -listed stock and is 32% higher than the company's 30-day volume weighted average price.
SodaStream's shares were up 9 percent in Tel Aviv, while its USA -listed shares were up almost 10 percent.
PepsiCo has announced it is buying Sodastream for $3.2bn (£2.5bn).
In a note to investors, Bonnie Herzog, managing director of equity research for Wells Fargo Securities, said she thinks the move can help accelerate PepsiCo's "ongoing strategic shift towards adding healthier options across its product mix and.complement the company's growing water portfolio - including its recently launched bottled sparkling water brand Bubly".
PepsiCo chairman and CEO Indra Nooyi says: "PepsiCo and SodaStream are an inspired match. That focus is well-aligned with Performance with goal, our philosophy of making more nutritious products while limiting our environmental footprint", said PepsiCo Chairman and CEO Indra Nooyi.
"Together, we can advance our shared vision of a healthier, more-sustainable planet", Nooyi said.
Daniel Birnbaum, SodaStream's CEO, said the company is honoured to be chosen as PepsiCo's beachhead into the at-home preparation market.
"I am excited our team will have access to PepsiCo's vast capabilities and resources to take us to the next level".
Pepsi said the transaction, which has been unanimously approved by both firm's boards and is expected to close by January 2019, is another step in its bid to "promoting health and wellness through environmentally friendly, cost-effective and fun-to-use beverage solutions".
PepsiCo was advised by Goldman Sachs and Centerview, while SodaStream was advised by Perella Weinberg Partners.