GLOBAL: Peltz calls on PepsiCo to make Mondelez approach

By | 18 July 2013

PepsiCo is being urged to make a bid for Mondelez

PepsiCo is being urged to make a bid for Mondelez

Activist investor Nelson Peltz has claimed that PepsiCo's current model is “unsustainable” and urged the group to buy snacks firm Mondelez. 

An analysis published by Peltz's Trian Fund Management yesterday (17 July) says that PepsiCo has “significantly underperformed over a prolonged period of time”. It suggests the issue is “structural” as the company grapples with its fast-growth and slow-growth businesses.

“We believe the status quo is unsustainable,” the analysis said. 

Trian, which owns around $1.3bn-worth of PepsiCo shares, said the group should either buy food and beverage multinational Mondelez and spin-off its own beverage unit, or separate its snacks and soft drinks businesses into two standalone companies. 

It emerged earlier this year that Peltz was building up stakes in PepsiCo and Mondelez.

However, Trian said: “PepsiCo has indicated that it is not inclined to pursue a Mondelez transaction, though we disagree with their rationale and hope they will reconsider their position”

It added: “If PepsiCo does not pursue a Mondelez transaction, we believe it must separate snacks/beverages. Separating beverages from snacks preserves the possibility of a strategic transaction in the future, which can create additional value.” 

However, in a statement emailed to just-drinks, a PepsiCo spokesperson disputed the remarks over the group's performance.  “We have a strong growth strategy and structure in place, and our results to date and returns to our shareholders prove that we are a high performing company and our strategy is working," the spokesperson said.

"We are confident in our ability to deliver long-term shareholder value as an integrated food and beverage company.”

In April, the group admitted it had held discussions with Peltz over its long-term growth plans.

Expert analysis

Carbonated Soft Drinks - China

Use this Carbonated Soft drinks in China report to answer some key questions, how smaller players can compete in a market dominated by The Coca-Cola Company and PepsiCo, are there opportunities for natural carbonated soft drinks in China, how mini packs can successfully be used to increase sales and what other opportunities in the on-trade channel can be tapped to increase the potential for carbonated soft drinks in this channel?

Sectors: Mergers & acquisitions, Soft drinks

Companies: PepsiCo

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