Activist Investor Whitworth Takes PepsiCo Stake

Tuesday, 15 May 2012 04:48 PM

 

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PepsiCo Inc. said activist shareholder Ralph Whitworth has taken a stake in the company and has held “constructive” meetings with executives.

The holding by Whitworth’s Relational Investors LLC as March 31 will be disclosed in a regulatory filing as soon as Tuesday, said two people with knowledge of the matter, who declined to be identified because the stake isn’t yet public. Peter Land, a spokesman for PepsiCo, confirmed the meetings with the investor.

Whitworth has used his shareholdings to agitate for change at companies including industrial conglomerate ITT Corp. and defense contractor L-3 Communications Holdings Inc., pushing for improvement at those two companies before they announced spinoffs in 2011. Hewlett-Packard Co. appointed Whitworth to its board last year after he accumulated a stake in the computer maker.

PepsiCo rose 1 percent to $67.85 at the close in New York. Before today, the stock had gained 1.2 percent this year.

Chief Executive Officer Indra Nooyi is working to boost U.S. beverage sales and regain market share from Coca-Cola Co., the world’s largest soft-drink maker. Profit this year will decline about 5 percent on a constant-currency basis and then increase at a high single-digit percentage rate starting in 2013, PepsiCo has said.

Job Cuts

The company said on Feb. 9 it would cut 8,700 jobs and boost marketing spending for its brands by as much as $600 million. PepsiCo lost share in the U.S. carbonated beverage market to Atlanta-based Coca-Cola from 2008 through 2010, according to Beverage Digest, an industry newsletter. In 2010, Diet Coke overtook full-calorie Pepsi-Cola to become the second- best-selling soft drink in the U.S. behind Coca-Cola.

PepsiCo’s struggles have led analysts, including Ali Dibadj of Sanford C. Bernstein & Co., to suggest that the company’s beverage and snacks businesses would be worth more separate than together. Nooyi has dismissed such recommendations.

Whitworth and David Batchelder founded Relational in 1996 with an initial allocation of $200 million from the California Public Employees’ Retirement System, the nation’s largest public pension fund. The two had previously worked for billionaire oil executive T. Boone Pickens.

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