By Mike Esterl
PepsiCo Inc. and activist investor Trian Fund Management LP have
buried the hatchet--at least for now.
The snack and beverage giant said Friday that William R.
Johnson, the retired chairman of H.J. Heinz Co. and an advisory
partner of Trian, will join PepsiCo's board as an independent
director.
The addition of Mr. Johnson, recommended by PepsiCo shareholder
Trian, makes it unlikely Trian will launch a potentially messy
proxy fight for board seats in the coming weeks.
The compromise also means Trian probably will dial down its
often noisy public campaign since 2013 to split up PepsiCo, whose
billion-dollar brands include Gatorade sports drinks and Lay's
potato chips.
Trian has argued PepsiCo's beverage-and-snack businesses would
perform better separately because the beverage unit is growing more
slowly than its snack unit and is less profitable. PepsiCo has been
losing market share to rival Coca-Cola Co., exacerbating an
industrywide decline in U.S. soda consumption.
But PepsiCo Chairman and Chief Executive Indra Nooyi has
steadfastly opposed a split, arguing the company benefits from its
scale. A person close to the company reiterated Friday that a split
isn't being considered.
Ms. Nooyi's hand was strengthened in October, when PepsiCo
raised its 2014 profit outlook for the second time after price
increases, cost cuts and emerging markets growth fueled
better-than-expected third-quarter results.
Nelson Peltz, Trian's chief executive, praised PepsiCo as "a
world-class" company in a news release issued Friday by PepsiCo.
"We support [Ms. Nooyi's] commitment to operational excellence,
which has resulted in improved performance at the company," Mr.
Peltz added.
In a statement Friday, Ms. Nooyi said Mr. Johnson's "extensive
consumer packaged goods experience will be an important addition"
to PepsiCo's board. Trian has "provided valuable input to many
aspects" of PepsiCo's business, including the recommendation that
Mr. Johnson join its board, Ms. Nooyi added.
While Trian suggested Mr. Johnson as a candidate, the activist
typically seeks board members from its own partners and had earlier
suggested it could join the board of the beverage unit if Pepsi
split up.
It placed Mr. Peltz on the board of Mondelez International Inc.
and Trian partner Ed Garden on the board of Bank of New York Mellon
Corp. last year. Last week, Trian started a proxy campaign against
DuPont Co., seeking to put Mr. Peltz and three others onto the
board of the chemicals giant.
As an independent director, Mr. Johnson will be obligated to
represent the interests of all shareholders, not just Trian.
Mr. Johnson does serve as an adviser to the activist investor
and had grown close to Mr. Peltz after the investor won a board
seat at Heinz following a 2006 proxy fight. Trian also turned to a
former Heinz executive for the DuPont fight, nominating former
finance chief Arthur Winkleblack to that board.
J.P. Morgan analyst John Faucher said breakup chatter is
unlikely to go away, but less likely to be aired publicly. "While
we still think that a breakup of PepsiCo is highly unlikely, [Mr.]
Johnson's presence on the board will keep it in discussion," Mr.
Faucher wrote in a research note.
Friday's agreement also saves Trian from fighting two proxy
fights against major companies at the same time, which would have
been an unprecedented challenge for an activist.
PepsiCo said Mr. Johnson will join the company's board of
directors March 23. Mr. Johnson joined Heinz in 1982 and spent 31
years at the company. He became Heinz's CEO in 1998.
Josh Beckerman contributed to this article.
Write to Mike Esterl at mike.esterl@wsj.com
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