Did PepsiCo, Inc. (PEP) Save Itself From Proxy Fight?

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Pepsi PEP

What could have turned out to be a potential proxy fight for board member seats of PepsiCo, Inc. (NYSE:PEP) in the following weeks has ended in an amicable settlement with an activist investor. The company seems to have patched up with Trian Fund Management LP at least for the time being. Therefore, smooth sailing of the board nominees can be expected at the upcoming meeting to elect board members.

PepsiCo, Inc. (NYSE:PEP) disclosed that William Johnson, Trian’s advisory partner and a former H.J. Heinz Co. Chairman, would join its board as an independent member. The decision was based on the recommendations of Train.

Rhetoric To Be Down

Trian has been campaigning since 2013 to seek the splitting of the beverage company into two. The latest announcement from the beverage company would tone down the rhetoric of the investment company against the multinational company. Trian believed that the beverages and snack maker would be able to perform better individually since the growth in beverage unit was slower while snack business was less profitable.

Train comments assumed importance in the wake of its rival gaining market share at the cost of PepsiCo, Inc. (NYSE:PEP). Aside from this, there was also an industry-wide fall in the consumption of soda in the United States.

However, the company’s Chairman and CEO, Indra Nooyi, has been successful so far in opposing a split. The CEO felt that the company stands to gain from its scale. A company spokesperson said that there was no split under consideration.

Change of Heart

After PepsiCo agreed to induct Trian’s nominee, the investment company changed its tact. In the PR issued by the company, Trian’s CEO has not only praised the beverage company but also extended his support to Nooyi’s commitment towards operational excellence that helped improved recent results. The hands of Nooyi were strengthened after the company lifted its profit forecast in October for the second time following the realization of cost cutting measures besides better than estimated growth in emerging markets.

Meanwhile, John Faucher, analyst from J.P. Morgan, said that the chatter of splitting PepsiCo, Inc. (NYSE) would not vanish completely. However, Trian’s nominee presence would keep the splitting issue alive though public airing of views could be curbed.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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