Activist shareholder Ralph Whitworth has built a stake worth about $610 million in PepsiCo Inc. (PEP) and held meetings with the soft-drink maker’s executives.
Whitworth’s Relational Investors LLC held almost 9 million shares as of March 31, or 0.6 percent of shares outstanding, according to a regulatory filing yesterday. The PepsiCo holding was the investor’s largest by market value at the end of the first quarter, according to the filing.
“We have had constructive meetings with Relational,” Peter Land, a spokesman for Pepsico, said yesterday in a telephone interview. “Our senior management meets regularly with investors, and Relational is a respected institution.”
Whitworth has used his shareholdings to agitate for change at companies such as ITT Corp. (ITT) and defense contractor L-3 Communications Holdings Inc. (LLL), pushing for improvement at those two businesses before they announced spinoffs in 2011. Hewlett-Packard Co. (HPQ) appointed Whitworth to its board last year after he accumulated a stake in the computer maker.
The investor increased his holding in Purchase, New York-based PepsiCo to 4.76 million shares at the end of the year from 3.25 million shares as of Sept. 30, according to filings yesterday. The value of the March stake was calculated using PepsiCo’s closing price of $67.85 yesterday.
The stock rose 1.2 percent to $68.63 at 9:32 a.m. New York time. It had gained 2.3 percent this year through yesterday, while larger rival Coca-Cola Co. (KO) increased 9.4 percent.
Chief Executive Officer Indra Nooyi is working to boost U.S. beverage sales and regain market share from Coca-Cola, the world’s largest soft-drink maker. Profit this year will decline about 5 percent on a constant-currency basis, PepsiCo has said.
The company said on Feb. 9 it would cut 8,700 jobs and boost marketing spending for its brands by as much as $600 million. PepsiCo lost share in the U.S. carbonated beverage market to Atlanta-based Coca-Cola from 2008 through 2010, according to Beverage Digest, an industry newsletter.
PepsiCo’s struggles have led analysts Ali Dibadj, at Sanford C. Bernstein & Co.; Jack Russo, from Edward Jones in St. Louis; and Ann Gurkin, at Richmond, Virginia-based Davenport & Co., to suggest that the company’s beverage and snacks businesses could be worth more separate than together. Nooyi has dismissed such recommendations.
Relational also bought about 11.4 million shares of Western Union Co. (WU) in the first quarter, bringing his total position to 16.9 million shares, according to the filing. He acquired 2.1 million shares of retailer Abercrombie & Fitch Co. (ANF) and sold 4.8 million shares of Freeport-McMoRan Copper & Gold Inc. (FCX), his entire position.
Whitworth and David Batchelder founded Relational in 1996 with an initial allocation of $200 million from the California Public Employees’ Retirement System, the nation’s largest public pension fund. The two had previously worked for billionaire oil executive T. Boone Pickens.
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