May 15 (Reuters) – Activist investor Relational Investors
LLC disclosed its stake in PepsiCo Inc on Tuesday, a
move that could put more pressure on the company as it works to
improve performance in its North American soft drink business.
PepsiCo, home to Tropicana orange juice, Gatorade sports
drink and Frito-Lay snacks, came under fire late last year as
many on Wall Street were dismayed with its stagnant stock price
and a domestic soda business that was losing market share to
rival Coca-Cola Co.
Relational, a San Diego-based investment firm, revealed in a
securities filing that it began amassing a stake in PepsiCo last
year.
Its stake of 8.98 million, or 0.6 percent, of PepsiCo shares
was worth $595.9 million as of March 1. The firm, run by Ralph
Whitworth, has previously urged companies it owned stakes in to
sell or spin off divisions.
But Relational did not say it was planning any such action
for PepsiCo. That, and the fact that the stake is so small, are
reasons for the market’s muted reaction to the news, said
Bernstein Research analyst Ali Dibadj.
“To be an activist in a company you need to have a larger
piece in the company than that, typically,” Dibadj said. “And
because (Relational) didn’t come out and say they want to take
some action, I think it’s more of a view of ‘we’ll be monitoring
your progress and because we’re shareholders we hope you do
well.'”
PepsiCo shares closed up 1 percent at $67.85 on the New York
Stock Exchange. They are up 2.3 percent year-to-date.
PepsiCo spokesman Peter Land said the company has had
“constructive meetings” with Relational.
“Our senior management meets regularly with investors, and
Relational is a respected institution,” Land said.
Many analysts and investors have discussed the possibility
of a break-up of PepsiCo in the wake of spinoff plans by food
and beverage companies including Fortune Brands, Kraft Foods Inc
and Sara Lee.
Instead, Chief Executive Indra Nooyi is executing a plan to
turn around the North American soft drink business that includes
ramping up advertising, cutting thousands of jobs and warning
Wall Street to expect a bigger-than-expected decline in
near-term earnings.
PepsiCo’s market capitalization is $105 billion, based on
the number of shares outstanding as of April 20 and Monday’s
closing price.
