Peltz’s Activist Fund Reports Owning 2.36 Million PepsiCo Shares

Billionaire Nelson Peltz, the activist investor who has pushed for change at major food companies, reported that his hedge fund purchased a $146 million stake in PepsiCo Inc.

Trian Fund Management LP held 2.36 million PepsiCo shares as of Sept. 30, according to a Form 13F filed yesterday by the New York-based fund. It’s the first time Trian has reported investing in PepsiCo, the world’s largest snack-food maker.

The investment raises the possibility that Peltz may lobby the Purchase, New York, company to take steps aimed at boosting shareholder returns. PepsiCo shares have generated an average annual gain of 3.7 percent during the past two years when dividends are included, trailing the 13 percent increase in shares of rival Coca-Cola Co.

Peltz “has bought a very valuable property,” said Donald Yacktman, president of Yacktman Asset Management Co., an Austin, Texas, investment adviser that has made PepsiCo its largest holding at 19.6 million shares. Noting that PepsiCo’s 3.3 percent dividend yield exceeds that of long-term U.S. Treasuries, Yacktman said, “Either Pepsi is very undervalued or long-term Treasuries are very overvalued.”

Peter Land, a PepsiCo spokesman, declined to comment. Anne Tarbell, a spokeswoman for Peltz’s fund, didn’t return a call seeking comment after regular business hours.

Heinz, Cadbury

Peltz’s previous targets include ketchup maker H.J. Heinz Co., luxury retailer Tiffany & Co. and Kraft Food Co., which announced in August it would spin off its North American grocery business that has about $16 billion of annual revenue. He was also successful in lobbying Cadbury Schweppes Plc to separate its confectionery business from its drinks unit, which now trades as Dr Pepper Snapple Group Inc.

PepsiCo fell 0.8 percent yesterday to close at $62.80 in New York trading. The stock declined 3.9 percent this year.

The company’s snack and beverage operations may be worth about $90 a share on a stand-alone basis, according to a September estimate by Jack Russo, an analyst for Edward Jones in St. Louis.

Indra Nooyi, PepsiCo’s chief executive officer, said during an Oct. 12 conference call that the company had been “the topic of speculation fueled by a number of high profile corporate split-ups.” Nooyi said the company’s success is tied to being an integrated snack and beverage business, adding, “I firmly believe that PepsiCo’s value is maximized as one company.”

Yacktman, the investment manager, said yesterday that PepsiCo should keep the two businesses together.

“I’m not enamored with the idea of breaking it up,” Yacktman said. “I don’t see where the company benefits from that long-term.”

To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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