Blog: Pershing investment adds to PepsiCo/Mondelez rumour mill

Michelle Russell | 16 April 2013

Speculation is once again mounting about a potential marriage between Mondelez International and PepsiCo.

Following the reports last month that activist investor Nelson Peltz had gone on a US$2bn spending spree, building up stakes in Mondelez and PepsiCo, it seems someone else has been shopping too.

According to dealReporter, Bill Ackman's hedge fund Pershing Square has made an investment in Mondelez, fuelling further speculation over a potential merger between the two behemoths.

Rumours have swirled that Peltz has built up his stakes in Mondelez and PepsiCo with a view to pushing for a merger of the companies into a snack food Goliath.

In the wake of the Peltz reports, PepsiCo said it saw "no need" for major deals. It insisted it was seeing "strong progress" in its "strategy to deliver long-term growth and create shareholder value".

However, the reported move by Ackman will only serve to reignite the speculation.

This isn't the first time Ackman's hedge fund has had exposure to a Kraft entity. Pershing owned Kraft Foods shares before the company split but sold the entire stake in the former company in the second quarter of 2012.

As of 31 December, Pershing Square reports owning 5,978,214 shares. While, this could be considered only a small position (worth around $179m, according to hedge fund watcher Market Folly) compared to the rest of its portfolio, it could be significant given it is a new disclosure.

A tie-up between the snack businesses of PepsiCo and Mondelez could have strategic logic if you take into consideration that both see sales growth weighted to emerging markets and their product offerings are complimentary. Moreover, a merger between the two would perhaps serve to calm investor jitters about Mondelez's reliance on the developing world.

More may become clear on which firm might be pushing the board when next month's round of 13-F equity holding filings are published.

 


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