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Article updated: 4/20/2013 4:27 PM

Pepsi-Mondelez stakes raise merger speculation

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Nelson Peltz's Trian Fund Management LP disclosed stakes in PepsiCo Inc. and Mondelez International Inc., increasing speculation that he'll push for a merger of the food makers.

Trian said in a filing Saturday that it owned about 3.93 million PepsiCo shares valued at about $269.1 million as of Dec. 31. The investor also purchased 19.4 million Mondelez shares valued at about $494.2 million at the end of last year. PepsiCo said after the filing was released that it had talked with Trian about ideas to drive growth and shareholder value.

"We don't know what he is pushing for necessarily, but the belief is something around Pepsi and Mondelez getting together," Ali Dibadj, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview. "The theory is that Mondelez has good distribution in emerging markets. One of the opportunities for Pepsi snacks is to get into emerging markets."

Another activist investor, Ralph Whitworth of Relational Investors LLC, supports Peltz's effort to combine the companies and has now bought a stake in Mondelez, according to a person familiar with the matter. Relational, which owned 7.6 million PepsiCo shares as of Dec. 31, has since sold down that stake at a gain, the person said.

PepsiCo rose 1.9 percent to $82.77 at the close in New York. Mondelez, the snacks and coffee business spun off from Kraft Foods Inc. last year, gained 5.3 percent to $31.69.

The Daily Telegraph of London reported last month that Peltz could push for a merger of the companies, citing people it didn't identify. At that time, PepsiCo said it didn't need large-scale acquisitions to increase growth and shareholder value.

'Respected Investor'

"In recent weeks, we have held meetings with Trian to discuss and consider their ideas and initiatives as part of our ongoing evaluation of all opportunities to drive long-term growth and shareholder value," Purchase, New York-based PepsiCo said today in a statement on its website. "Trian is a respected investor, and we look forward to continuing constructive discussions with them."

For his part, Whitworth expects other large PepsiCo investors will support a combination with Mondelez, especially if PepsiCo struggles to meet earnings forecasts, according to the person. Plus, many of the investors in PepsiCo and Mondelez also were large holders in HJ Heinz Co., Cadbury Ltd. and Kraft with Peltz, the person said.

Several Months

These companies were either sold, taken private or split up. Peltz's plan would take several months to come together and occur in 2014 if at all, the person added.

Michael Mitchell, a spokesman for Deerfield, Illinois-based Mondelez, declined to comment on the Trian filing and said the company is focused on its products and markets to produce value for shareholders.

Anne Tarbell, a spokeswoman for New York-based Trian, declined to comment on the filing in an e-mail. Melisa Tezanos, a spokeswoman for PepsiCo, didn't respond to a request for additional comment. A spokeswoman for Relational didn't return calls seeking comment.

Trian Fund Management licensed several new special purpose funds in the Cayman Islands in December and January, according to records maintained by the Cayman Islands Monetary Authority. The fund manager said in a March 28 filing with the U.S. Securities and Exchange Commission that one of these funds, Trian SPV (SUB) VII LP, has assets of about $1 billion.

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