After months of fighting tooth and nail to convince PepsiCo that it should split its beverage from its snacks division, Nelson Peltz of Trian Management and Pepsico CEO Indra Nooyi seem to have made a truce, but DuPont management had better watch out for the activist investor.
Peltz felt that with the decline in popularity of fizzy drinks, Pepsi’s beverage business was cramping its snack business’ style, but Indra Nooyi felt that was precisely the reason to keep the two segments together, so they could offset each other’s weaknesses and that they belonged together (after all, what better with Frito Lay corn chips than an ice cold Pepsi, or vice versa?)
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Nelson Peltz, who took a large stake in the company, promised a proxy battle, but that is not going to happen now that a Peltz nominee for Pepsico’s board, former Heinz CEO William Johnson, has been welcomed to the board. This move seems to allay worries that PepsiCo will split up, as it seems to signal a truce.
However, DuPont shareholders who don’t want to see the chemical company split up may have more reason to worry, as Peltz has waged a proxy battle with DuPont and wants four of his appointees on the board. So much for the expression, “If it ain’t broke, don’t fix it, ” because the new trend in activist investing is not going for poorly performing companies with potential, but trying to move things around at companies that seem just fine, such as Bill Ackman’s pestering botox-maker Allergan to split itself up. As quoted by the Wall Street Journal, “Strong stock performance is not … a vaccine against activism.” CEO David Pyott seemed unwilling to sell Allergan for all the Botox in Hollywood, but it happened after Ackman applied enough pressure, and DuPont with Peltz at its back might have the same fate, but in the form of splitting up rather than selling off.