PepsiCo, Inc. (PEP), Mondelez International Inc (MDLZ): How to Handle an Activist Billionaire Shareholder

Current score: 1-1
The Mondelez International Inc (NASDAQ:MDLZ) presentation may have eased shareholder concern about its operating income margin, and this is a positive aspect of Peltz’s pressure. While Mondelez’s 300 basis-point projections are not as aggressive as Trian’s 400 basis points, the two numbers are close enough for the Mondelez target to increase shareholder’s indifference to Trian’s proposal.

So thus far, through a duel between detailed slide presentations, Mondelez International Inc (NASDAQ:MDLZ)’s management has for the time being effectively neutralized the attractiveness of Peltz’s overtures. One caveat as the year wears on could be Mondelez’s revenue performance. The company has repeatedly asserted that it will hit the low end of its 5%-7% growth range this year by outperforming during the first two quarters in the back half of the year. While over the long term the company will probably not have difficulty hitting this target, misses over the next two quarters will place Mondelez in the position of having to defend both its top- and bottom-line strategies.

Peltz’s dilemma
As far as Nelson Peltz is concerned, Trian Fund Management would potentially be able to create even more value if it could hold Mondelez International Inc (NASDAQ:MDLZ)’s shares and find a different partner for PepsiCo, Inc. (NYSE:PEP), rather than combine equity from the same pocket and attempt to realize synergies. The problem Trian faces: There probably isn’t as good a fit in terms of size, product line, and market penetration for Pepsi’s snack business as Mondelez. And for the near future, that’s going to be Mondelez’s problem, too.

The article How to Handle an Activist Billionaire Shareholder originally appeared on Fool.com.

Fool contributor Asit Sharma has no position in any stocks mentioned. The Motley Fool recommends and owns shares of PepsiCo. 

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.