PepsiCo Rejects Call for Beverage Split
PURCHASE, N.Y. – PepsiCo Inc. announced today it will not separate its North American beverage business from its faster-growing Frito-Lay food division.
The Purchase, N.Y.-based company has long been encouraged by activist investor Nelson Peltz to separate PepsiCo’s two divisions in an effort to boost its stock price.
"After an exhaustive review, which included the assistance of bankers and consultants, the company’s management and board of directors have concluded that PepsiCo will maximize shareholder value by retaining [its North American beverage division] in its current structure within the PepsiCo portfolio," the company wrote in a statement today.
PepsiCo outlined several reasons for keeping its North American beverage business intact. Chief among these is that the division is highly profitable and generates substantial U.S. free cash flow for shareholders; provides operational and customer scale benefits to PepsiCo’s other operations in North America; and is expected to benefit from planned productivity and innovation initiatives.
Following this announcement, PepsiCo declared an increase in the company’s annual dividend to $2.62 from $2.27 and raised its share repurchase program to approximately $5 billion.
In addition to asking PepsiCo to separate its main two operating divisions, Peltz previously asked the company to merge its Frito-Lay food division with Mondelez Inc. The activist investor later abandoned that plan, however.
Mondelez itself was recently separated from Kraft Foods Group Inc.