Nelson Peltz revives campaign to split up PepsiCo

(Reuters) - Activist Investor Nelson Peltz renewed his crusade to convince PEPSICO (PEP.NY)Inc to spin off its slow-growing beverage business from its flourishing snacks division, less than a week after the company poured cold water on the idea.

Shares of PepsiCo, whose snack brands include Lays, Cheetos and Doritos, rose as much as 2.3 percent on Thursday.

"Two leaner and more entrepreneurial companies" through the spin-off would boost sales and margins in the snacks business, while the drinks business would generate stable flow of cash that could be returned to shareholders, Peltz said in a 37-page letter to PepsiCo's board made public on Thursday.

"The points that he lays out ... are for the most part very valid and compelling and he makes a very good case for the potential split up of the businesses," said Kevin Dreyer, a portfolio manager at Gabelli Funds LLC, which owns about 1.6 million shares of PepsiCo.

Even if PepsiCo did not split up, Peltz's presence will keep management under pressure to improve the business, Dreyer said.

PepsiCo, which also sells Gatorade and Tropicana juices, reported a better-than-expected quarterly profit last week, helped by a 3 percent rise in snacks volumes. However, beverage volumes fell sharply in North America.

At the time, PepsiCo also shot down Peltz's proposal, with Chief Executive Indra Nooyi saying a split up would hurt its ability to negotiate with retail customers.

PepsiCo reiterated on Thursday that it had no plans to split up. "Our focus is on delivering results for our shareholders, not new, costly distractions that will harm shareholder interests," a PepsiCo spokesman said in an email.

INFLUENTIAL INVESTOR

Peltz, who began his campaign to split up PepsiCo last July, said he will begin meeting shareholders immediately to gather support for a split.

Peltz's investment firm, Trian Fund Management, owns about $1.2 billion of PepsiCo stock, which represents about 1 percent of the company based on the stock's close on Wednesday.

The billionaire investor has influenced mega food industry deals such as the spin off of Dr Pepper Snapple Group from Cadbury, Kraft's purchase of Cadbury, and the subsequent breakup of Kraft into Mondelez International and Kraft Foods Group Inc .

Peltz also owns stakes and serves on the boards of The Wendy's Co , asset manager Legg Mason Inc and diversified U.S. manufacturer Ingersoll-Rand PLC .

The investor had previously pushed PepsiCo to create a snack food giant by acquiring Oreo cookie maker Mondelez, but dropped the idea after winning a seat on the Mondelez board last month.

Peltz said on Thursday PepsiCo continues to lose market share to Coca-Cola in the Americas where it has been consistently "out-innovated" and "outmaneuvered," which is putting increasing and unnecessary pressure on the company's other divisions such as Frito-Lay.

PepsiCo, like rival Coca-Cola Co , has been battling declining soda sales in developed markets, especially the United States, as health-conscious consumers switch to non-carbonated beverages such as juices and health drinks.

Peltz's letter to PepsiCo's board was first reported by the Wall Street Journal on Wednesday.

PepsiCo shares were up 1.6 percent at $78.35 in afternoon trading on the New York Stock Exchange.

(Reporting by and Chris Peters in Bangalore and Lisa Baertlein in Los Angeles; Editing by Supriya Kurane, Ted Kerr and Savio D'Souza)

WhatsAppFacebookTwitterLinkedinBeloudBluesky