Nelson Peltz’s Trian Fund Management has bought US$146m of PepsiCo shares, fuelling speculation that the US food and drink giant may look at splitting its snacks and drinks divisions.
The billionaire activist investor confirmed the investment in a filing to the US Securities and Exchange Commission yesterday (14 November). Peltz purchased 2.36m shares as of 30 September, according to the filing. This represents 0.15% of PepsiCo’s outstanding shares, according to analysts Stifel Nicolaus.
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It is the first time Trian has reported investing in PepsiCo. While the investment is relatively small, Peltz is known to be an activist investor and his involvement has fuelled speculation that restructuring could be on the cards at Pepsi cola and Walkers crisps maker.
There is reported to be boardroom frustration at the company’s performance. Some analysts, meanwhile, have said that the firm may consider splitting its business.
“Our view has been that PepsiCo is being ineffectively managed, undermining the opportunity for investors to participate in intrinsic value,” Stifel Nicolaus analysts Mark Swartzberg and Aashiv Shah said today (15 November).
They said that Peltz’s involvement may mean changes at the company. “As for how, we think there are a number of options including scenarios that leave PepsiCo as one company and improve a) its US beverage strategy and execution while also b) restoring capital discipline in investing for future growth, especially outside the US.”
Nonetheless, the analysts said there is merit to splitting the firm’s food and beverage divisions. “We think Power of One is of limited long-term competitive advantage and Nooyi could run a pure-play international PepsiCo while the company’s Americas businesses – Frito Lay North America, PepsiCo Americas Beverages – are run by dedicated professionals with the responsibility and incentives of separate public ownership.”
In August, the company defended itself against questions over a potential break-up of the company after Kraft Foods announced the separation of its drinks brands as part of a plan to split the company in two. Peltz’s Trian Fund Management holds stakes in Kraft Foods and HJ Heinz.
