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Whitworth's Relational swallows PepsiCo stake

by Lou Whiteman | Published May 16, 2012 at 3:32 PM

Activist investor Ralph Whitworth on Wednesday, May 16, disclosed a $600 million position in PepsiCo Inc. amid talk that the company should separate its beverage business from its faster-growing food assets.

Whitworth's Relational Investors LLC in a regulatory filing disclosed ownership of 8.98 million shares, or less than 1%, of Purchase, N.Y.-based PepsiCo. The investor gave no explanation for the stake and did not call for change, but according to reports, Whitworth and PepsiCo management have met and agreed that should the company's stock performance not improve, changes will be considered.

Relational has been a shareholder of PepsiCo since last year, buying 3.25 million shares in the third quarter of 2011.

PepsiCo shares are up about 2% on the year, trailing archrival Coca-Cola Co.'s 9% gain.

PepsiCo, which has lost U.S. marketshare to Coke in recent years, announced plans in February to cut 8,700 jobs and boost its marketing spending by as much as $600 million in hopes of jump-starting its carbonated beverage business.

The company has also been trying to spread its reach globally, in December investing $3.8 billion for a 66% stake in Russian dairy and juice producer Wimm-Bill-Dann Foods OJSC.

In addition to beverages PepsiCo also runs a large food business following its 2001 purchase of Quaker Oats Co. for $13.7 billion.

Some analysts have suggested PepsiCo follow in the footsteps of Kraft Foods Inc. and other food companies and split off faster-growing assets in hopes of attracting more growth-stock investors.

Kraft last August announced its intention to split its grocery business from its snack food unit. Around the same time, Sara Lee Corp. said it would sell its refrigerated dough business to Ralcorp Holdings Inc. for $545 million.

PepsiCo CEO Indra Nooyi has argued that a spinoff would be too expensive and would cost both units the benefits they enjoy from their large size and scale.

But when announcing the restructuring in February, Nooyi said that should the increased marketing push not generate results in the next 18 to 24 months, PepsiCo would consider alternatives.

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Whitworth's Relational swallows PepsiCo stake

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