Pepsi And Nelson Peltz Are At It Again

By Sam Lewis

Investor pushing for company to split snacks and beverages

In July, Nelson Peltz was told “no” by Pepsi when he wanted the company to split in an effort to purchase Mondelez, maker of popular snack items like Oreos and Wheat Thins. Despite failed efforts months ago to get Pepsi to divide its beverage business from its snack business — the company owns Frito-Lay and Doritos, to name a few — Peltz is at it again.

Peltz, founding partner of Trian Fund Management, has been reaching out to Pepsi’s largest investors over the last several weeks. He is trying to gauge how much support he could gain if his proposed split of Pepsi, and acquisition of Mondelez, were to be executed. If enough support was gathered, Peltz may even attempt gaining a seat on the board at Pepsi.

The repeated efforts by Peltz to get Pepsi’s CEO, Indra Nooyi, to split the company and acquire Mondelez are viewed by many as just a way for Peltz to make money. Peltz currently owns 2.3 percent of Mondelez, an acquisition by Pepsi would further his stake in each company, deepening his pockets. During Pepsi’s July earnings call, Nooyi stated Pepsi plans to acquire smaller “tuck-in” businesses, smaller than $500 million, but didn’t see any larger deals on Pepsi’s horizon.

Since Peltz’s proposed plan for Pepsi back in July, the company’s stock has fallen more than five percent. Some investors feel that the company could be doing even worse if Peltz were not part of the picture. “If Peltz says ‘I’m going away,’ the stock could drop 9 percent,” an anonymous source of The New York Post says. Pepsi has not offered comments regarding Peltz’s plan, but a spokesperson for Pepsi states, “We have a strong growth strategy and structure in place, and our results to date and returns to our shareholders prove that we are a high-performing company and our strategy is working. We are confident in our ability to delivery long-term shareholder value as an integrated food and beverage company.”

Much like JC Penney’s former top investor Bill Ackman, Pepsi may soon be venturing down a long, drama-filled road. If Peltz can garnish enough support for his plan, gaining a seat on Pepsi’s board may just be step one in his plan to create an international snack foods monopoly.