Memo to PepsiCo: Lose the beverages, keep the snacks and buy Mondelez

That headline is pretty much the gist of a lengthy "whitepaper" that Trian Fund Management, which owns significant stakes in both companies, posted on its website July 17.

Activist shareholder Nelson Peltz, founding partner and chief executive of Trian, explained on CNBC that he is urging PepsiCo Inc. to acquire the newly independent Mondelez International Inc. to create what should be the world's largest snack food company. Even if PepsiCo doesn't do the deal, it should separate its snack and beverage businesses, he said.

Peltz has been suggesting improvements to PepsiCo for some time, but the company has indicated it's not interested in such radical changes. Mondelez itself has been growing more slowly than projected since its October 2012 split from Kraft Foods.

"Trian believes PepsiCo is at a strategic crossroads as secular forces ranging from changing consumer tastes to the increased importance of emerging markets have changed the outlook for its key businesses," Trian said on its website. "Trian believes PepsiCo’s current structure is increasingly unmanageable. While it has a leading portfolio of 22 billion-dollar brands, PepsiCo has underperformed its peers as it grapples with the differing needs of its fast-growth (snacks) and slow-growth (beverages) businesses and the resulting inherent conflict in allocating its resources."

Trian's "Alternative A" sees PepsiCo buying Mondelez for $35-38 per share, according to the New York Times, then using the merger "as a catalyst to spin off its beverages business." Trian acknowledged this would be a "transformational merger." Mondelez stock, which neared a high of $32 a share in April, more recently has been trading below $29. PepsiCo, on the other hand, has been on a nice upward trend this year, currently about $86, a 32-year high, although there may be some run-up due to Trian's efforts.

Alternative B foresees no acquisition of Mondelez but the separation of PepsiCo's snacks and beverages.

Trian has amassed stakes of more than $1 billion in both PepsiCo and Mondelez since early this year, the Times reported. While there has been speculation on Wall Street, it's unclear if Trian has enough support among other PepsiCo shareholders. PepsiCo maintains there are significant synergies between its snacks and beverages businesses.

All of these gyrations would, of course, make Peltz a much richer man.

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