Nelson Peltz, the activist investor, is joining Mondelez International Inc.’s board and probably will push the food maker to cut costs and improve profitability.
With the addition of Peltz, the board expands to 12 members, the Deerfield, Illinois-based company said today in a statement. Peltz’s Trian Fund Management LP was the fifth largest investor in Mondelez as of September, according to data compiled by Bloomberg. Peltz will stand for election at the 2014 annual meeting, which hasn’t been announced.
Meanwhile, Peltz is abandoning a proposal for Mondelez to merge with Pepsico Inc. Instead, he probably will push Mondelez to boost margins this year even as the company struggles with slowing growth in emerging markets, Chris Growe, an analyst for Stifel Financial Corp. in St. Louis, said today in a note.
“Although the addition of Mr. Peltz to the board could be considered anti-climactic, this serves to get Mondelez focused squarely on execution and business fundamentals,” he said.
Last year, in what Peltz called a Plan A, he urged PepsiCo to buy Mondelez and spin off PepsiCo’s beverages business. A Plan B called just for the separation of PepsiCo’s snack and beverage units.
“Given that PepsiCo is not interested in pursuing plan A, we are encouraging them to pursue plan B,” Anne Tarbell, a Trian spokeswoman, said in a telephone interview.
The investor disclosed stakes in the two companies in April and said in July that an all-stock deal would be valued at as much as $67.8 billion.
Trian owned 40.9 million shares, or 2.3 percent, of Mondelez as of September. As a director, Peltz may push Chief Executive Officer Irene Rosenfeld to deepen cost cuts.
“We look forward to working constructively with Nelson to drive growth, improve margins and increase value for all shareholders,” Mike Mitchell, a spokesman for Mondelez, said today after the announcement. “As long as Trian is a significant shareholder of PepsiCo, Mr. Peltz will recuse himself from any discussions pertaining to PepsiCo.”
Rosenfeld was unavailable for comment.
PepsiCo, based in Purchase, New York, rose 0.9 percent to $82.92 at the close in New York. The shares rose 21 percent last year. Mondelez fell 2.3 percent to $34.45. The shares rose 39 percent last year.
CNBC reported earlier today that Peltz wouldn’t renew pressure for a Mondelez-PepsiCo merger.
Activist funds generally acquire equity stakes in companies and try to force corporate management to make changes that boost share prices and investor returns. Trian in 2012 successfully pushed Ingersoll-Rand Plc to sell some of its businesses. The Swords, Ireland-based maker of air-conditioning systems and climate-control technologies was spinning off Allegion Plc, the security unit that sells residential and commercial door locks.
In 2006, Trian waged a six-month proxy fight with H.J. Heinz Co. to win seats on the board and persuade management to execute a turnaround plan. Warren Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital Inc. bought the maker of food products from ketchup to infant formula for about $23 billion last month.
At a July 17 appearance at the CNBC Institutional Investor Delivering Alpha Conference in New York, Peltz praised Rosenfeld for being a skilled strategic manager, while criticizing her company’s margins and its name.
“The name Mondelez I hate,” Peltz, Trian’s chief executive officer, said. “It sounds like a disease.”
The name is a combination of the word “monde,” derived from Latin for world, and “delez,” an expression for delicious, according to a press release last year. Kraft asked employees to suggest names, and more than 1,000 participated.
Kraft realized that the pronunciation of Mondelez wasn’t easily picked up by everyone, Mitchell said at the time.