The packaged food and beverage industry has been dogged by
lackluster demand, leading growth-seeking activist investors to
demand spinoffs and deep cost cuts to "unlock" value.
A majority of institutional investors, including Pepsi shareholders,
support a split, according to a Wall Street survey conducted by
Bernstein Research and released on Monday.
Peltz, who was instrumental in carving up food companies such as
Cadbury and Kraft, has had Pepsi in his sights on and off since
July. Other activist investors are seeking to break up Darden
Restaurants Inc <DRI.N>, the corporate parent of the Olive Garden
and Red Lobster restaurant chains.
"If I was the only holder of it, or if my family was the only holder
of it, I don't think I would split it up," Buffett told CNBC, the
cable business channel, on Monday.
Pepsi's Frito-Lay North America business includes snack brands such
as Lay's, Doritos and Cheetos. It booked 2013 net revenue of $14.1
billion, accounting for about 21 percent of the company's total net
revenue last year.
PepsiCo Americas Beverages had 2013 net revenue of $21.1 billion, or
roughly 32 percent of the total.
"I think that Frito-Lay is an extremely good business. It's a better
business than the soft drink business, but I think the soft drink
business is a good business too, and I don't see any reason to split
them up," said Buffett, chairman and chief executive officer of
Berkshire Hathaway Inc <BRKa.N>.
PepsiCo, like rival Coca-Cola Co <KO.N>, has struggled with
declining sales in developed countries, especially the United
States, as health-conscious consumers switch to non-carbonated
beverages such as water, juices and health drinks.
Pepsi executives repeatedly have defended the current structure of
the company, with CEO Indra Nooyi saying a split would hurt its
ability to negotiate with retail customers.
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Other institutional investors disagree with Pepsi and with Buffett.
The majority, 55 percent, surveyed by Bernstein, said Pepsi should
be broken up. They cited greater focus as a potential benefit and
the loss of synergies between the snacks and beverage businesses as
At the same time, the same percentage of investors did not believe
such a change would happen in the next one to two years, according
to the survey.
Those surveyed "have done detailed work on this debate already, and
hold a generally pessimistic view regarding company management,"
Bernstein analyst Ali Dibadj wrote in a client note.
The Bernstein survey was based on responses from 100 investors, 63
of which were current Pepsi shareholders.
Peltz's investment firm, Trian Fund Management, owns about $1.2
billion in Pepsi stock.
The shares fell 0.7 percent to $79.50, not far from a 52-week low,
as the broader market was lower.
(Reporting by Lisa Baertlein in Los
Angeles; editing by Jeffrey Benkoe)
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