US: PepsiCo board rejects latest split call
PepsiCo will be hoping that its letter to Trian will mark the end of the split row
PepsiCo has written directly to Trian Partners, rejecting the fund management company's latest demand to split the firm's beverage and snack divisions into two companies.
In a letter sent yesterday (27 February) to Nelson Peltz, the activist investor behind Trian, PepsiCo director Ian Cook said the board had revisited Peltz's suggestion but again concluded it was not the most appropriate course for the company to choose. The letter was sent in response to a 31-page white paper from Trian that was submitted earlier this month.
"PepsiCo's value is maximised as an integrated food and beverage company," Cook wrote. "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, but dropped the call in January when Mondelez 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, CEO Indra Nooyi announced the completion of a strategic review that would see PepsiCo retain its drinks business. At the same time, the company reported an increase in annual profits, a share buyback plan and the extension of its cost-cutting initiative to 2019.
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