A timeframe agreed upon between PepsiCo Inc and Trian Fund Management’s Nelson Peltz to privately address the activist investor’s suggestions for improving shareholder returns may be closing, sources told Reuters.
(Reuters) – A timeframe agreed upon between PepsiCo Inc (PEP.N: Quote, Profile,Research, Stock Buzz) and Trian Fund Management’s Nelson Peltz to privately address the activist investor’s suggestions for improving shareholder returns may be closing, according to three sources familiar with the matter.
Peltz, who has played a role in some of the global food industry’s biggest deals, revealed a stake in PepsiCo in April. The soft drink and snack maker said at the time that it had held meetings with Trian “to discuss and consider their ideas”. It did not say what those ideas were, though a concurrent purchase of Oreo cookie maker Mondelez International Inc (MDLZ.O: Quote, Profile,Research, Stock Buzz) shares fueled speculation Peltz would push for a merger.
As of March 31, Trian owned 12 million shares of PepsiCo and 40.3 million shares of Mondelez, worth a combined total of $2.19 billion, according to a regulatory filing.
Following discussions that occurred in the spring, Trian and PepsiCo agreed on a timeframe to privately consider the suggestions, which include the purchase of Mondelez, strategic options for the North American beverage business, and more cost-cutting, according to the sources.
While talks are ongoing and continue to be constructive, the sources say that initial period is up, leading some to believe that Trian could soon go public with its concerns about PepsiCo if the company does not reply to them.
PepsiCo declined to comment. Trian was not immediately available.
Peltz is scheduled to do an interview on CNBC cable television on Wednesday afternoon.
Another source, who declined to be identified, said Peltz usually prefers private, cooperative discussions with management over contentious, public situations and likes to give companies time.
PepsiCo shares rose nearly 24 percent this year through Monday, touching an all-time high and outperforming a 13 percent gain for rival Coca-Cola Co (KO.N: Quote, Profile, Research, Stock Buzz). Given the company’s strong performance recently, drastic actions may not be needed, said Sanford Bernstein analyst Ali Dibadj.
“Oftentimes companies react if they’re put under pressure by activists in doing some of the right things from a shareholder perspective, like returning cash to shareholders, increasing the dividend, maybe structural changes,” Dibadj said. “My sense is that at this point they can still deliver okay numbers relative to some expectations. They may not need to do that.”
Of the options discussed, several are already on the table.
PepsiCo has said publicly that it is exploring structural alternatives for its North American beverage business but does not plan to discuss it until early next year.
It is also already in the midst of a 3-year productivity program aimed at saving $3 billion by the end of 2014. In addition to cutting some 8,700 jobs, the company has streamlined its supply chain and boosted its efficiency.
As for acquisitions, PepsiCo has said it sees no need for large deals, though it says it could spend less than $500 million a year on small tuck-in acquisitions.