Is PepsiCo next in line for a split?

As soon as Kraft Foods announced its planed split, the speculation began: Which company would be the next to divide in two? reports AdAge.

Some Wall Street analysts say it might be PepsiCo, since the company's fast-rising snacks unit is being held back by its underperforming beverage business. "The stock is underperforming ... due to problems in the beverage business," Morningstar analyst Philip Gorham wrote in a report that found that PepsiCo could "create shareholder value by breaking up." Meanwhile, Jack Russo, Edward Jones, said: "We feel the company is undervalued. The two pieces if broken out separately would be worth far more than the current stock is valued." And he added: "Companies react to shareholder pressure, that's a fact."
 
Pepsi dismissed such talk, telling Ad Age in a statement that "Kraft's announcement does not influence our point of view on PepsiCo's current business portfolio or strategy. We have a very different portfolio, and we continue to see very attractive opportunities to create value in our global snacks and beverages businesses."

"Pepsi has a history of transforming itself as the outlook for businesses change," said Bill Pecoriello, CEO of Consumer Edge Research. "The company rolled up restaurants and spun those off; spun out the bottling businesses and then brought it back; acquired Tropicana and Gatorade when it was apparent carbonated soft drinks weren't the answer for long-term growth. An eventual split off of the beverage business could be the next step in the company's evolution with the bottler buy, the lower long-term outlook for U.S. beverages having changed and competitive challenges the business faces."

Then again, some analysts speculate that a standalone Pepsi snacks unit would be in a good spot to merge with Kraft's snacks standalone. "The two companies will have complementary portfolios in salty snacks, biscuits, gum, and candy, and are dominant in overlapping geographies (Brazil, Russia, India, Mexico, et al), opening the door to a potential transaction between the two companies," UBS said in a report.

I don't see a breakup or merger happening in the near term, but there wasn't a hint of the  Kraft breakup until it occured.