Activist investor Relational Investors LLC disclosed that it has acquired a stake worth nearly $600 million in food and beverage giant PepsiCo Inc. (PEP). The move could put pressure on PepsiCo as it grapples with a flat stock price and loss of market share to rival Coca-Cola Co. (KO).
Relational Investors is a San Diego-based, privately-owned asset management company that serves some of the largest pension funds in the world. The company was co-founded by Ralph Whitworth and David Batchelder.
In a filing with the Securities and Exchange Commission, Relational Investors said that in the year ended March 31, 2012, it owned 8.98 million shares of PepsiCo worth $595.88 million. PepsiCo has a market capitalization of $106.11 billion.
A spokesman for PepsiCo said the company has had constructive meetings with Relational and that PepsiCo's senior management meets regularly with investors. He added that Relational Investors was a respected institution.
PepsiCo is the maker of Pepsi-Cola drinks, Tropicana juices and Gatorade sports drinks, Quaker Oats, Frito-Lay Chips.
Investors have been urging PepsiCo to split up the beverage business from its higher-growth snacks business, following the trend set by other food companies.
In late April, PepsiCo reported a decline in profit for the first quarter, amid modest growth in revenue. Net income attributable to the company slipped to $1.13 billion from $1.14 billion in the same quarter last year. Earnings per share remained unchanged at $0.71. Revenue rose 4 percent to $12.43 billion from $11.94 billion in the prior-year period.
Early this year, PepsiCo said it would cut about 8,700 jobs, or nearly 3 percent of its global workforce, under a cost-savings program that is expected to generate $1.5 billion of incremental cost savings by 2014.
Reliance Investors has previously urged companies that it has owned stakes in to sell or spin off underperforming units. In mid-November 2011, Hewlett-Packard Co. (HPQ) announced that it has appointed Ralph Whitworth, co-founder of Relational Investors, to its board.
The company said that it has entered into a letter agreement with Relational, under which Relational will support the HP board, and the board will nominate and support Whitworth, for the next two years, as long as Relational continues to be a significant stockholder of HP.
PEP closed Tuesday's trading at $67.85, up $0.70 or 1.04 percent on a volume of 16.06 million shares.
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