Corporate profiteers circle PepsiCo
Is this the writing on the wall? In mid May 2012 the activist investor Ralph Whitworth disclosed that his hedge fund Relational Investors has bought a USD 600 million position in PepsiCo Inc, amid talk that the company should separate its beverage business from its faster-growing snacks assets.
Whitworth’s Relational Investors LLC in a regulatory filing disclosed ownership of 8.98 million shares, or less than 1 percent, of PepsiCo. The investor gave no explanation for the stake and did not call for change, but according to reports, Whitworth and PepsiCo’s management have met and agreed that, should the company’s stock performance not improve, changes will be considered.
Don’t hold your breath wondering what these “changes” might be. If we read Mr Whitworth’s actions correctly, he will push Pepsi’s management towards “doing a Kraft”: in August 2011 Kraft announced its intention to split its grocery business from its snack food unit.
Relational has been a shareholder of PepsiCo since last year, buying 3.25 million shares in the third quarter of 2011, it was reported.
Having lost market share in the U.S. to Coke in recent years, PepsiCo announced in February this year that it would cut 8700 jobs and boost its marketing spending by as much as USD 600 million in hopes of jump-starting its carbonated beverage business.
Although PepsiCo CEO Indra Nooyi has argued for some time that a spin-off would be too expensive and would cost both units the benefits they enjoy from their large size and scale, she also said in February that, should the increased marketing push not generate results in the next 18 to 24 months, PepsiCo would consider alternatives.
