By Lisa Baertlein
LOS ANGELES, March 3 Investor Warren Buffett and
some Wall Street fund managers are divided on activist Nelson
Peltz's renewed proposal to split PepsiCo Inc's robust
snacks division from its beverage business.
The packaged food and beverage industry has been dogged by
lackluster demand, leading growth-seeking activist investors to
demand spinoffs and deep cost cuts to "unlock" value.
A majority of institutional investors, including Pepsi
shareholders, support a split, according to a Wall Street survey
conducted by Bernstein Research and released on Monday.
Peltz, who was instrumental in carving up food companies
such as Cadbury and Kraft, has had Pepsi in his sights on and
off since July. Other activist investors are seeking to break up
Darden Restaurants Inc, the corporate parent of the
Olive Garden and Red Lobster restaurant chains.
"If I was the only holder of it, or if my family was the
only holder of it, I don't think I would split it up," Buffett
told CNBC, the cable business channel, on Monday.
Pepsi's Frito-Lay North America business includes snack
brands such as Lay's, Doritos and Cheetos. It booked 2013 net
revenue of $14.1 billion, accounting for about 21 percent of the
company's total net revenue last year.
PepsiCo Americas Beverages had 2013 net revenue of $21.1
billion, or roughly 32 percent of the total.
"I think that Frito-Lay is an extremely good business. It's
a better business than the soft drink business, but I think the
soft drink business is a good business too, and I don't see any
reason to split them up," said Buffett, chairman and chief
executive officer of Berkshire Hathaway Inc.
(BREAKINGVIEWS-Inverses Buffett and Icahn correlate many
ways too )
PepsiCo, like rival Coca-Cola Co, has struggled with
declining sales in developed countries, especially the United
States, as health-conscious consumers switch to non-carbonated
beverages such as water, juices and health drinks.
Pepsi executives repeatedly have defended the current
structure of the company, with CEO Indra Nooyi saying a split
would hurt its ability to negotiate with retail customers.
Other institutional investors disagree with Pepsi and with
Buffett. The majority, 55 percent, surveyed by Bernstein, said
Pepsi should be broken up. They cited greater focus as a
potential benefit and the loss of synergies between the snacks
and beverage businesses as a risk.
At the same time, the same percentage of investors did not
believe such a change would happen in the next one to two years,
according to the survey.
Those surveyed "have done detailed work on this debate
already, and hold a generally pessimistic view regarding company
management," Bernstein analyst Ali Dibadj wrote in a client
The Bernstein survey was based on responses from 100
investors, 63 of which were current Pepsi shareholders.
Peltz's investment firm, Trian Fund Management, owns about
$1.2 billion in Pepsi stock.
The shares fell 0.7 percent to $79.50, not far from a
52-week low, as the broader market was lower.