Investor Devises Plan for PepsiCo

Nelson Peltz, CEO and co-founder of Trian Partners

Nelson Peltz refuses to sit and watch the clock tick as the state of the CSD industry continues to sink PepsiCo.

Trian Partners, a New York-based investment firm of which Peltz is the CEO and co-founder, has already invested approximately $1.4 billion in PepsiCo and $1.3 billion in the snack company Mondelez International, according to The New York Times. So while PepsiCo CEO Indra Nooyi and her fellow brass continue to tout the company’s business model, Peltz believes that PepsiCo should adjust its plan by acquiring Mondelez, which owns popular brands such as Oreo, Nabisco, Cadbury and Trident.

“[Nooyi] inherited this structure that we don’t think works anymore,” Peltz said Wednesday at the CNBC/Institutional Investor Delivering Alpha conference.

PepsiCo represents brands from two divergent industries: CSDs, which continue to struggle, and snacks, one of the swiftest growers in the country. In conjunction with Peltz’s appearance at the conference, Trian released its desired plan for PepsiCo to morph into more of a global snacks company. The firm projects that by the end of 2015, the proposed acquisition could lead to approximately $175 of implied value per PepsiCo share and approximately $72 of implied value per Mondelez share.

While swaying more toward snacks would adhere to recent trends in the marketplace, PepsiCo hasn’t yet embraced such a move.

“Pepsi right now doesn’t love the deal,” Peltz said.

Trian offered an alternative if PepsiCo decides against the Mondelez acquisition. The alternative advises PepsiCo to separate snacks and beverages, which Trian believes would create a focused snacks leader. The firm projects that this move could lead to approximately $136 to $144 of implied value per share by the end of 2015. This would also preserve the possibility of PepsiCo making a different investment in the future.

“Pepsi is at a crossroads at this point in time,” Peltz said. “They’ve got two businesses. They’ve got a cash business and they’ve got a growth business.”