Pepsico (PEP) Investors Have a New Friend

May 16, 2012 8:06 AM EDT
Broken blue-chip Pepsico, Inc. (NYSE: PEP), a stock that has underperformed as growth has stalled, has a target on its back. Ralph Whitworth's Relational Investors, a known activist fund, has amassed a nearly $600 million stake in the beverage and snack food company.

Whitworth made public the stake for the first time Tuesday afternoon after building it over the past few quarters. Confidential treatment granted from the SEC allowed the fund to keep the stake secret, until expiration.

Data showed Relational built its stake from 3,250,100 shares as of September 30, 2011, to 4,763,315 shares at December 31, 2011 and then to 8,980,787 shares at March 31, 2012.

Pepsico confirmed the stake in a statement last night and said the company has held "constructive talks" with Relational.

It is not exactly known what Relational is asking for but speculation centers around a break-up. Some investors have been clamoring for a break-up for the better part of a year. Splitting the snack-food and beverage businesses, they believe, will create tremendously more shareholder value. So far, Pepsi has resisted a break-up. Maybe a little more convincing from Whitworth will move the needle.

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