- By Region
An activist investor has taken a $600m stake in PepsiCo in hopes that the US snacks and drinks company will seriously consider splitting off its struggling domestic beverage business.
Relational Investors, which is run by Ralph Whitworth, disclosed in a regulatory filing on Tuesday that it has acquired nearly 9m PepsiCo shares. The stake represents about 0.6 per cent of the company, which has a market capitalisation of more than $100bn.
According to people familiar with Relational’s thinking, Mr Whitworth thinks that PepsiCo has underperformed in recent years and that the company should consider spinning off the US beverage business in the next year. Mr Whitworth is encouraged by the company’s recently announced efforts to revive the business but thinks that the strategy will take too long to generate results, these people said.
In February, PepsiCo announced that it was cutting 8,700 jobs and investing up to $600m in its biggest brands in response to restlessness from investors that the company’s stock price has been stagnant. Much of the displeasure has been focused on the US beverage business, particularly carbonated soft drinks, as the company’s flagship brand has lost market share to Coca-Cola.
Indra Nooyi, PepsiCo chief executive, has fended off suggestions from analysts that the company would be better off following in the footsteps of Kraft, which last year said it was splitting its US grocery business from its international snacks business. Ms Nooyi has said a split would be too costly for PepsiCo and that such a move would diminish the benefits of the scale it gets from its fast-growing snacks business.
However, Ms Nooyi said in February that the company would have 18 to 24 months to determine if its new strategy was working and that other “structural” alternatives remain possible at that point.
Relational manages about $6bn and has taken stakes and pushed for changes in companies such as Home Depot, Genzyme and ITT.
Jeff Dahncke, a PepsiCo spokesman, said that the company had held meetings with Relational. “Our senior management meets regularly with investors, and Relational is a respected institution,” he said.
Shares of PepsiCo rose 1 per cent to $67.85 on Tuesday.