Some history.
https://archive.nytimes.com/dealboo...-nelson-peltz-after-2-years-of-locking-horns/
PepsiCo Reaches Truce With Nelson Peltz After 2 Years of Locking Horns
By Michael J. de la Merced - January 16, 2015 4:20 pm
Nearly two years of public saber-rattling between
PepsiCo and the billionaire investor
Nelson Peltz appeared to end on Friday, as the two announced a truce of sorts.
PepsiCo, the food and beverage giant,
said that it would add William R. Johnson, the former chief executive of
H. J. Heinz, to its board. Mr. Johnson, who will serve as an independent director, is also an adviser to Mr. Peltz’s investment firm, Trian Fund Management.
The settlement will most likely end a long-running campaign by Mr. Peltz and his team to break up PepsiCo, who have asserted that investors would benefit by spinning off the company’s beverages business from its better-performing snacks unit.
The announcement comes on the heels of a very different — and decidedly more combative — situation at the chemical maker DuPont, where Trian
has begun a battle to win four seats on the board.
It is the latest settlement by Trian, whose success as a “constructive” activist investor willing to work behind the scenes with companies have led to the firm’s managing about $11 billion with a return of about 55 percent over the last two years, net of fees.
PepsiCo seemed poised to become the next target of a proxy challenge by Mr. Peltz, who over the last decade has taken that aggressive activist step only twice: at Heinz and DuPont. Trian first unveiled its campaign to break up PepsiCo in the summer of 2013, following a playbook that the investment firm has previously deployed at the likes of Cadbury Schweppes, which broke up into Cadbury and the Dr Pepper Snapple Group.
At PepsiCo, Mr. Peltz and his team said that splitting up the two businesses would free them up to pursue different management strategies. The snacks division, which includes Frito-Lay, would become a public company with a fast-growing stock price, while the beverages business — weighed down by a drop in soda sales — could pay out handsome dividends.
Trian, which owns a stake of roughly 1 percent, said that it had met with 100 of its fellow shareholders, winning the public support of the big California public pension fund known as Calstrs.
But PepsiCo has staunchly defended its current business model after conducting what it called “an exhaustive review” of strategic alternatives. Helping the food company is its performance. The company’s third-quarter profit surpassed analysts’ expectations, after management cut costs and raised prices to bolster the bottom line.
And shares in PepsiCo have risen nearly 17 percent over the last 12 months, handily outpacing the Standard & Poor’s 500-stock index. Mr. Peltz has said privately, however, that his firm’s agitation has contributed to that rise.
Still, the announcement on Friday suggests that Trian and Indra Nooyi, PepsiCo’s chairwoman and chief executive, had reached some kind of détente that will prevent a split of the company — at least for now.
“We have had constructive discussions with Trian for nearly two years,” Ms. Nooyi said in a statement. “They have provided valuable input to many aspects of our business, and the recommendation of Bill as an independent director to the board.”
Mr. Peltz also took the opportunity to extend an olive branch.
“We support Indra’s commitment to operational excellence, which has resulted in improved performance of the company. We are confident that Bill will be a strong and complementary addition to the PepsiCo board,” he
said in a statement.
As part of the deal, Mr. Johnson will become PepsiCo’s 14th board member on March 23. He will then be included with other nominees at the company’s annual shareholder meeting later this year.
The appointment of Mr. Johnson also highlights a new initiative by Trian to emphasize its focus on improving operations at companies in which it invests. Mr. Johnson is one of three inaugural members of what the firm calls Trian Advisory Partners, alongside Dennis M. Kass, the former chairman of
Legg Mason, and Dennis Reilley, the chairman of
Marathon Oil and a former senior executive at DuPont.
The newly formed group is meant to help the firm identify potential new investments and to provide advice for management teams. And as at PepsiCo, they can also serve as directors on those companies’ boards.
Trian executives said that they had come to know the three men through investments in companies where the executives had worked. In some ways, the addition of Mr. Johnson — who led Heinz during the sometimes bruising battle with Mr. Peltz — is a surprise. During the proxy fight,
Mr. Johnson contended that if the financier succeeded, “you’re going to have a destabilizing situation.”
But Mr. Peltz has since described becoming close to his onetime foe, with Mr. Johnson spending time at Trian’s offices in Midtown Manhattan.
Similarly, Trian executives did not know Mr. Kass or Mr. Reilley until becoming involved in their companies. Both men have also spent significant time with the activist firm, including regularly meeting with senior executives.
Trian is expected to announce more additions to the advisory board in the coming months.
“We have served on boards with our new advisory partners in recent years and appreciate the independent thinking and industry knowledge they bring to board and management collaborations,” Edward P. Garden, a Trian co-founder and its chief investment officer, said in a statement. “We are excited to formalize their roles with Trian and expect they will leverage the ongoing work of our 17 investment professionals.”
