Despite posting better-than-expected fourth-quarter and full-year results recently, along with a dividend hike and a plan for additional share buybacks, PepsiCo (NYSE: PEP) investors are not happy. Shares have fallen to a nine-month low since last week’s report. And one investor in particular, activist investor Nelson Peltz, is making things tougher on the management of the snack and beverage giant.
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After backing off so the company could perform a strategic review, Peltz and his Trian Fund Management have renewed their call for a breakup of PepsiCo. Specifically, Trian sent a 37-page letter to PepsiCo’s board of directors Wednesday making the case for why the company should spin off its struggling beverage business.
Trian says it owns roughly $1.2 billion in PepsiCo stock, and its letter said it would begin meeting with shareholders “immediately” to drum up support for the company to split.
PepsiCo said in a response to Trian’s letter that management and the board remain opposed to breaking up the company: “Our focus is on delivering results for our shareholders, not new, costly distractions that will harm shareholder interests.” The company’s “exhaustive” review came down on the side of remaining a single company. CEO Indra Nooyi said when earnings were released, “Decoupling our beverage and snack businesses in North America would significantly reduce our relevance to our customers.”
Like rival Coca-Cola Co. (NYSE: KO) PepsiCo has been struggled with declining soda sales in an era of more health-conscious consumers increasingly switching to juices and health drinks. Coca-Cola posted disappointing results and weak guidance this week, and its shares have plunged to near their 52-week low.
Peltz also had pushed for PepsiCo to acquire Mondelez International Inc (NASDAQ: MDLZ) and create a snack food giant, but he dropped that effort after winning a seat on the Mondelez board last month.
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