Board backs Nooyi in Trian spat

Board backs Nooyi in Trian spat

PepsiCo's board of directors has thrown its weight behind CEO Indra Nooyi and once again rejected calls from Trian Partners to split into two companies.

In a letter to Nelson Peltz, the activist investor behind Trian, PepsiCo director Ian Cook said the board has revisited the suggestion but again concluded it was not the most appropriate course for PepsiCo or its investors. Cook said what he called the "financial engineering" of a break-up would erode value for shareholders, not create it.

"PepsiCo's value is maximised as an integrated food and beverage company," Cook insisted. "The board and management have concluded that the financial engineering you propose erodes value for shareholders rather than creates value."

Peltz first called for a split of PepsiCo into a fast-growth snacks business and a slow-growth beverages unit last year. He suggested the snacks arm should be merged with Mondelez International. He dropped the call for a merger with Mondelez in January when the Cadbury maker offered him a board seat.

However, Trian has continued to push for PepsiCo to be broken up. Earlier this month, Peltz said he would take his arguments to shareholders in a bid to gain support.

Peltz believes PepsiCo's low-growth drinks and high-growth snacks businesses are fundamentally different models and would operate better independently. PepsiCo management has repeatedly rebuffed this suggestion.

Earlier this month, Nooyi announced the completion of a strategic review that would see PepsiCo retain its drinks business. At the time, the company also unveiled an increase in annual profits, a share buyback plan and the extension of its cost-cutting initiative to 2019.

Speaking at the Consumer Analyst Group of New York conference last week, management detailed how it is leveraging the benefits of holding mega brands in both the drinks and snacks categories.