Relational’s Whitworth Says Mondelez Needs to Boost MarginsBeth Jinks
Ralph Whitworth said his activist fund is in talks with Mondelez International Inc. as it pushes the company to improve margins, and warned “the jury is out” on whether current management can deliver.
The co-founder of Relational Investors LLC is stepping up pressure on Mondelez, which recently said that another activist -- Trian Fund Management LP’s Nelson Peltz -- will join its board. Relational first disclosed a 1 percent stake in the snackmaker last year.
“We’re working behind the scenes to try to urge change there,” Whitworth said today at the Active-Passive Investor Summit in New York. “Does the current management have the ability to get the job done? That’s a question mark. If they don’t, I think that you’ll probably see some changes there.”
Mondelez in February reported fourth-quarter earnings, sales, and gross profit margin that fell short of analysts’ expectations.
In a follow up interview, Whitworth said that top management would have to change if Mondelez fails to gain traction on improving margins. Peltz, who was pushing for Mondelez to merge with PepsiCo Inc., has abandoned that proposal and is expected to push Chief Executive Officer Irene Rosenfeld to deepen cost cuts.
Whitworth had supported Peltz’s efforts to combine Mondelez and Pepsico, a person familiar with the matter said last year.
“We engage in regular dialogue with our shareholders and always welcome input to further value creation,” Mondelez spokesman Mike Mitchell wrote in an e-mailed response to questions. Mondelez rose 0.7 percent to $35.03 in New York today. The shares have gained over 11 percent in the past year.
Founded in 1996 by Whitworth and David Batchelder, Relational buys stakes in companies it considers undervalued and then lobbies management and boards for changes to boost investor returns. In recent years the firm has targeted industrial companies including equipment manufacturer SPX Corp., bearings maker Timken Co. and machinery builder Illinois Tool Works Inc. For the past year, Whitworth has served as interim chairman of Hewlett-Packard Co. after urging changes to turnaround the largest personal-computer maker.
San Diego-based Relational, which manages about $6 billion, also holds stakes in energy group Hess Corp., agricultural commodity processor Bunge Ltd., x-ray maker Hologic Inc. and air-conditioning manufacturer Ingersoll-Rand Plc, according to its most recent holdings disclosures.
Activist investors tend to buy at least 5 percent of a company’s stock and flag their intention to actively engage corporate executives and directors by disclosing their holding in a 13D filing with the U.S. Securities and Exchange Commission.