Analysis - PepsiCo snacks and beverages break-up cannot be ruled out
PepsiCo says it is still confident as a standalone business
A break-up of PepsiCo's snacks and beverage units into two standalone companies is more likely than the group bidding for Mondelez, according to an analyst.
Earlier this week, activist investor Nelson Peltz publicly called on the New York state- headquartered company to either acquire food and beverage multinational Mondelez, or split its business into two. PepsiCo, however, said it is “confident” in its abilities as an integrated food and drinks group.
But Stifel analyst Mark Swartzberg thinks a break-up of the business “could ultimately happen”. “We... believe Nelson Peltz’s track record is difficult to ignore and that his Alternative B (a split of the business) is not far from the course already being pursued by PepsiCo management,” Swartzberg said in a note.
On the chances of PepsiCo bidding for Mondelez, the analyst added: “We think it is difficult for this transaction to happen any time soon seeing as PepsiCo management remains opposed to it and Mr Peltz's leverage boils down to persuasion in the court of investor sentiment.”
Analysts Bernstein said it did not think Peltz's actions change the "immediate-term deal landscape" for PepsiCo or Mondelez. "However, we note that management plans can quickly change, especially in response to potential shareholder pressure, and regardless of what ultimately transpires Trian's (Peltz's investment firm) actions have significantly increased pressure on both management teams to deliver strong results in the short-to-medium term," Bernstein added.
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