WSJ: Activist Firm Acquires $600 Million Stake in PepsiCo

Relational Investors, an investment firm known for taking an activist role in underperforming companies, announced that it has acquired a $600 million stake in PepsiCo – amounting to about 0.6 percent of the company – according to The Wall Street Journal. Relational began accumulating shares of PepsiCo in the fall of 2011, and has been one of several voices calling for the company to split its snack and beverage businesses into two separate and independent units.

Though PepsiCo has taken steps to improve sales and profitability – the company cut 8,700 jobs in February and plans to boost its 2012 marketing budget by as much as $600 million – the Journal reported that Relational has met with Pepsi executives, including CEO Indra Nooyi, about the cola giant’s North American beverage business and discussed possible changes in the structure of the company should performance not improve.

Despite Relational’s small stake in PepsiCo, it is expected that the investment firm will have a significant voice in the direction of company. Last year, Relational co-founder Ralph Whitworth gained a board seat at Hewlett-Packard, even though the firm only held a 1 percent stake in the company. And while Relational has stated that PepsiCo is currently taking the right steps toward improving shareholder value, the firm is likely to continue pushing for a separation of PepsiCo’s snack and beverage businesses, much in the way that Kraft Foods did last year. PepsiCo has continuously rejected calls to split the two units, stating that they are too closely tied and that a division would increase overall operating costs.