PepsiCo, Inc. (PEP) recently announced the appointment of activist investor, Nelson Peltz’s nominee, William R. Johnson, to its board of directors.
Peltz’s investment company, Trian Fund Management, holds a significant equity stake in Pepsi.
Johnson, who will join the board on Mar 23, will also be included in the company's list of nominees for election to the board at the 2015 annual shareholders' meeting. Johnson has in the past served as Chairman, President and Chief Executive Officer (CEO) of H.J. Heinz Company and is currently an Advisory Partner of Trian.
Peltz has been pressuring Pepsi for months to separate its underperforming beverage business from the stronger snacks unit. However, Pepsi’s board repeatedly rejected Peltz’s proposal arguing that the two businesses were better together.
Ian Cook, presiding director of Pepsi's board, stated last year that splitting the two businesses would erode instead or creating shareholder value.
CEO Indra Nooyi has also repeatedly stressed that retaining the American beverage business would be in the best interests of the company.
Shifting consumer preferences toward health and wellness and “good-for-you” products is lowering the demand for high-calorie soft drinks, especially in North America. Thus, beverage giants like Pepsi, Dr Pepper Snapple Group, Inc. (DPS), The Coca-Cola Company (KO) are witnessing declining sales of their carbonated beverages. Peltz feels Pepsi’s underperforming beverage business is overshadowing its fast growing snack unit.
In July, last year, Peltz reportedly threatened to launch a proxy fight at Pepsi. The election of Johnson to the board probably ends that possibility. The investment community is speculating whether Johnson’s appointment signals a truce between the company and Peltz, most likely ending the two-year battle between the parties.
Peltz had earlier also pushed Pepsi to buy global snacks company, Mondelez International, Inc. (MDLZ). However, he put off this agenda after joining the former’s board in January last year. Trian Fund Management also holds major stake in Mondelez.
Currently, Pepsi carries a Zacks Rank #3 (Hold).
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