Commentary

Peltz Wants To Trade Pepsi Cola For Mondelez

Robinson Cano, the New York Yankee’s best position player, spun off baseball-centric agent Scott Boras and acquired Shawn "Jay-Z" Carter and the CAA Sports earlier this year precisely because he wanted to expand his business interests beyond collecting a paycheck for whacking baseballs, as Daniel Barbarisi reports in the Wall Street Journal this morning. 

A Pepsi “tribute” commercial that broke during the All Star game this week is one of the first signs of the partnership paying off for the second baseman with an easy, winning grace on the field and a winning smile and an easy demeanor off of it. The same might be said for Pepsi, which has been MLB’s official soda since 1997, as Bloomberg’s Erik Matuszewski and Scott Soshnick inform us.

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“Cano is a marquee baseball player with widespread appeal,” Heidi Sandreuter, senior director of sports marketing at Pepsi, says in a release about the deal. "Cano brings the excitement of now to everything he does, making him a natural choice for the Pepsi brand." 

Nelson Peltz brings excitement to lot of what he does, too, which is to sometimes invest a delivery-truckload of money in a company through his Trian Partners asset management firm and then suggest that it shed members of the roster that may be on the downhill side of their prime. That’s exactly what he did yesterday by making public discussions he has had with Pepsi management.

“A few years back, Nelson Peltz helped drive Kraft and Cadbury together, putting the wheels in motion for the ultimate breakup of the former,” Steve Schaefer writes in Forbes. “Now, the billionaire is trying to run the same playbook on two current holdings: PepsiCo and the former Kraft, Mondelez International.”

To be precise, “Peltz, who said he had been in discussions with Pepsi’s management, proposed that Pepsi acquire Mondelez in an all-stock transaction worth $35 to $38 a share. Then, he said, he would like to see the company pay a dividend worth 20% of the market value before spinning off the beverage business,” William Alden reports in the New York Times.

“The carbonated soft drink business is not growing,” according to Peltz. “It’s a wonderful business, but it’s not growing. My kids just don't do soft drinks like the way I did," he told CNBC. Reports Schaefer: pairing it with the faster-growing snacks business, [Peltz] equates to “robbing Peter to pay Paul.” 

This all unfolded in public at CNBC’s and Institutional Investor’s “Delivering Alpha” conference in Manhattan yesterday after interviewer Andrew Ross Sorkinasked Peltz about a rumored large position in DuPont, and Peltz basically replied that he was going to talk about Pepsi and Mondelez.

Not coincidentally, a white paper, “Outlining Strategic Alternatives to Enhance Shareholder Value at PepsiCo,” was uploaded yesterday to Trian Partners’ website.

“During an interview on CNBC, Peltz said he talked about the proposal he called ‘Plan A’ with PepsiCo CEO Indra Nooyi,” the AP reports in USA Today. “He said he has a meeting planned with Mondelez CEO Irene Rosenfeld in the next couple of weeks.”

"Pepsi right now doesn't love the deals," Peltz admitted, urging shareholders to write to the company to support the idea. The company reiterated that position in a statement yesterday, according to the Dallas Morning News: “We have a strong growth strategy and structure in place, and our results to date and returns to our shareholders prove that we are a high-performing company and our strategy is working.” 

“Even if the Mondelez acquisition weren't to happen, Peltz said his ‘Plan B’ would be to have PepsiCo nevertheless disentangle its snacks business from its soda business,” according to the AP story.

Mondelez "regularly engages in meaningful conversations with its shareholders and looks forward to meeting with Trian to learn about their perspectives in more detail," a spokesman responded, according to Reuters’ Martinne Geller. There was no reported response to Peltz’ zing at the company’s moniker, however.

“At one point during his session, Peltz got big laughs when he joked that Mondelez was an awful name,” CNBC’s John Carney reports. ‘It sounds like a disease,’ he said. ‘I am suffering from Mondelez.’”

Most observers this morning seem to think that the odds of Peltz’ proposed deals actually happening are about likely as the Pittsburgh Pirates, which have played less than .500 ball for a couple of decades, winning their division. (What??? They’re in second place???)

Peltz had nothing to say about Pepsi’s alliance with Robbie Cano, which also includes a Pepsi Experience Points sweepstakes, as far as I can tell, but I’m betting his kids don’t play baseball, either, the way he presumably used to.

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