PepsiCo to Trian: The answer is still no
February 28, 2014
by Keith Nunes
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PURCHASE, N.Y. — The board of directors of PepsiCo, Inc. has rejected shareholder Trian Fund Management’s latest call for the company to breakup.
“I am writing to advise you that the board and management are comfortable and in complete alignment in rejecting your proposal,” wrote Ian Cook, presiding director for PepsiCo, in a Feb. 27 to Nelson Peltz, who leads Trian Fund Management L.P., which owns about $1.2 billion worth of PepsiCo common shares.
In a Feb. 19 letter to the PepsiCo board, Trian Fund recommended the company separate its global snacks and beverage segments into two independent companies.
“Trian believes the decision is one for shareholders, and it will immediately begin to engage fellow shareholders in a public dialogue with the goal of creating a groundswell of support for a separation of snacks and beverages,” the investment firm said. “Trian hopes to facilitate positive change at PepsiCo with the power of the argument.”
In his response, Mr. Cook noted that Trian’s latest recommendation comes in the wake of another rejected proposal.
“After initially proposing a spin-off of the snacks business and a merger of it with Mondelēz, you have now indicated that your primary suggestion at this point is for PepsiCo to separate its global snacks and beverage businesses,” Mr. Cook said. “We have carefully studied management’s extensive analysis of the current company structure and its beverage business and management’s conclusions that much of Trian’s data is selective and, in many instances, misused.
“Our board and management team are confident in the thoroughness of this analysis and in the conclusion that PepsiCo’s value is maximized as an integrated food and beverage company. We trust that you appreciate the seriousness with which we have examined your observations and proposal and the firmness with which we reject the proposal to separate the businesses. In short, the board and management have concluded that the financial engineering you propose erodes value for shareholders rather than creates value.”
Mr. Cook concluded his letter by noting that PepsiCo’s board and management have now turned their attention to running an integrated company for the benefit of all shareholders.