Top PepsiCo exec slams Peltz for selective ‘financial engineering’
In a filing sent to the US Securities and Exchange Commission (SEC) yesterday, PepsiCo released presiding director Ian Cook’s reply to Peltz’ own letter of February 19 2014 calling for “decisive action” to break-up the business given muted 2013 earnings and disappointing 2014 guidance.
“I am writing to advise you that the board and management are comfortable and in complete alignment in rejecting your proposal,” Cook begins, in an icily polite letter.
Mondelēz merger on back burner?
Cook suggested that after evaluating Peltz’ arguments, the PepsiCo board and management believed his emphasis had changed – after initially suggesting spinning-off snacks and merging it with Mondelēz.
“You have now indicated that your primary suggestion at this point is for PepsiCo to separate its global snacks and beverage businesses,” Cook writes.
It is true that Peltz’ letter makes no mention of Mondelēz – where he sits on the board – other than to praise CEO Irene Rosenfeld for unlocking $32bn of market capitalization by separating the Kraft Foods brand portfolio as was “along its natural fault lines” and insisting PepsiCo could do the same.
Cook continues by criticizing Trian Fund Management (Peltz’ investment vehicle) for “data [that] is selective and, in many instances, misused”.
‘Thank you for your interest in PepsiCo…’
“Our board and management team are confident in the thoroughness of this analysis and in the conclusion that PepsiCo’s value is maximized as an integrated food and beverage company,” Cook says.
“We trust that you appreciate the seriousness with which we have examined your observations and proposal and the firmness with which we reject the proposal to separate the business,” he writes.
“In short, the board and management have concluded that the financial engineering you propose erodes value for shareholders rather than creates value.”
Then the final, slightly damning sign-off: “We thank you for your interest in PepsiCo.”
At the time of writing Trian Partners was not available for comment, but Peltz has hinted that in the event of managerial reluctance he will seeks support from other PepsiCo shareholders (Trian owns around $1.2bn of the firm’s shares) to agitate for a spin-off of its global beverage business.