Activist Investor Nelson Peltz renewed his crusade to convince PepsiCo Incorporated to spin off its beverage business from its flourishing snacks division, less than a week after the company poured cold water on the idea.
Reuters reported that the shares of PepsiCo, whose snack brands include Lays, Cheetos and Doritos, rose as much as 2.3 per cent on Thursday.
“Two leaner and more entrepreneurial companies” through the spin-off would boost sales and margins in the snacks business, while the drinks business would generate stable flow of cash that could be returned to shareholders, Peltz said in a 37-page letter to PepsiCo’s board made public on Thursday.
Some investors and experts sided with Peltz, whose investment fund has successfully advocated for break-ups and mergers at major food companies, even as PepsiCo executives defended their position.
“The points that (Peltz) lays out … are for the most part very valid and compelling and he makes a very good case for the potential split up of the businesses,” said Kevin Dreyer, a portfolio manager at Gabelli Funds LLC, which owns about 1.6 million shares of PepsiCo.
Even if PepsiCo did not split up, Peltz’s presence will keep management under pressure to improve the business, Dreyer said.
PepsiCo, which also sells Gatorade and Tropicana juices, reported a better-than-expected quarterly profit last week, helped by a three per cent rise in snacks volumes. However, beverage volumes fell sharply in North America.