Most investors in survey back Pepsi split; Buffett opposes

Mon Mar 3, 2014 2:18pm EST
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By Lisa Baertlein

LOS ANGELES (Reuters) - Investor Warren Buffett and some Wall Street fund managers are divided on activist Nelson Peltz's renewed proposal to split PepsiCo Inc's (PEP.N: Quote) robust snacks division from its beverage business.

The packaged food and beverage industry has been dogged by lackluster demand, leading growth-seeking activist investors to demand spinoffs and deep cost cuts to "unlock" value.

A majority of institutional investors, including Pepsi shareholders, support a split, according to a Wall Street survey conducted by Bernstein Research and released on Monday.

Peltz, who was instrumental in carving up food companies such as Cadbury and Kraft, has had Pepsi in his sights on and off since July. Other activist investors are seeking to break up Darden Restaurants Inc (DRI.N: Quote), the corporate parent of the Olive Garden and Red Lobster restaurant chains.

"If I was the only holder of it, or if my family was the only holder of it, I don't think I would split it up," Buffett told CNBC, the cable business channel, on Monday.

Pepsi's Frito-Lay North America business includes snack brands such as Lay's, Doritos and Cheetos. It booked 2013 net revenue of $14.1 billion, accounting for about 21 percent of the company's total net revenue last year.

PepsiCo Americas Beverages had 2013 net revenue of $21.1 billion, or roughly 32 percent of the total.

"I think that Frito-Lay is an extremely good business. It's a better business than the soft drink business, but I think the soft drink business is a good business too, and I don't see any reason to split them up," said Buffett, chairman and chief executive officer of Berkshire Hathaway Inc (BRKa.N: Quote).   Continued...

Warren Buffett, co-chair of the 10,000 Small Businesses Advisory Council, takes part in a panel discussion following a news conference announcing a $20 million partnership to bring Goldman Sachs' 10,000 Small Businesses initiative to the city of Detroit, Michigan November 26, 2013. REUTERS/Rebecca Cook