Hedge fund manager Nelson Peltz, founder of Trian Fund Management, believes PepsiCo (PEP) should acquire Mondelez International (MDLZ). Peltz, who has previously made comments to that effect, reiterated his view that a Pepsi/Mondelez marriage makes sense Wednesday at the CNBC/Institutional Investor Delivering Alpha conference.
Peltz owns shares of both companies and his companies helped boost Pepsi, the world’s second-largest soft-drink maker, to a gain of almost 1.5%. Mondelez, the former unit of Kraft (KRFT) that makes the Oreo and Nabisco brands, among others, rose 2.1%. While those stocks are top-10 holdings in some major consumer staples ETFs, those funds did not benefit much from Peltz again advocating a Pepsi/Mondelez tieup. [Defensive Staples ETFs for Yield]
For example, the Consumer Staples SPDR (XLP) , the largest staples ETF by assets, closed higher on Wednesday, but not by much and XLP actually closed closer to its intraday low than its high of the day. Pepsi and Mondelez and both top-10 holdings in XLP, combining for nearly 8% of the ETF’s weight. [ETFs to Mimic Buffett]
Peltz suggested a plan for “PepsiCo, which would be an all-stock acquisition of Mondelez International ‘at a mid-teens premium,’ before paying a dividend of 20% of its market cap and then spinning off its beverage business,” reports Steve Schaefer for Forbes.
Peltz said at the Delivering Alpha conference that Pepsi derives two-thirds of its revenue from its snacks business, which includes the Frito-Lay brands, and that the company should not be covered by beverage industry analysts. XLP’s main rival, the Vanguard Consumer Staples ETF (VDC) , barely budged on the news.
Peltz thinks his plan gets the stock to more than $140 a share in 2015, and that Pepsi will be worth only $105 under the current way of doing business, according to Forbes. Pepsi at $140 represents massive upside from Wednesday’s close of almost $85.25. Should Peltz get his way, both XLP and VDC would benefit, but a slight edge goes to VDC because that ETF allocated an almost combined 10% to Pepsi and Mondelez at the end of the first quarter.
Vanguard Consumer Staples ETF
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
- Nelson Peltz