Sony Corporation (ADR) (SNE), The Walt Disney Company (DIS): Loeb Bumps It Up A Notch

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Soda or Snacks

A similar fight is taking place at PepsiCo, Inc. (NYSE:PEP) with Nelson Peltz, manager of the Trian hedge fund. He is calling for the company to buy snack maker Mondelez International and then spin off its slower growth drinks business. Even if the company doesn’t buy Modelez, Peltz still wants to see beverages jettisoned.

Mondelez, which recently separated from Kraft, hasn’t lived up to the growth expectations set up prior to the split. Joining that company with PepsiCo, Inc. (NYSE:PEP)’s Frito Lay arm would simply add a struggling company in the same line of business. Switching a snack turnaround for a beverage turnaround doesn’t seem like it would add much value. And what happens if Frito Lay’s growth stalls?

Keeping the beverage arm provides diversification that Monelez won’t. So far, PepsiCo is resisting the urge to merge and/or split. That’s good for investors. Pepsi’s top line fell about 1.5% last year, with earnings falling nearly 3%. That’s weak, but not horrible. And, the food giant’s top and bottom lines have headed generally higher over the last ten years. Management has earned a little time to work things out.

With a long history of annual dividend increases and slow, but steady growth, conservative investors would do well to consider PepsiCo shares as the company stands today.

It May Not Be Easy

Breaking Sony up may be an easy way to create value for a short-term trade, but it isn’t likely to help the company over the long term. Sony’s seemingly divergent businesses complement each other in important ways. That’s particularly true as devices and content become more entwined. The end-of-year release of PlayStation 4 will be important to watch in this regard.

Sony shares have jumped on Loeb’s involvement. Expect news to drive the stock in the near term. Loeb shifting gears in an attempt to push his “suggestion” shouldn’t inspire confidence in his side of this discussion. That said, there’s still notable turnaround potential at this struggling giant as it begins to right its electronics group. If there’s a split, however, investors should totally reevaluate their involvement here.

The article Loeb Bumps It Up A Notch originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends PepsiCo and Walt Disney (NYSE:DIS). The Motley Fool owns shares of PepsiCo and Walt Disney. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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