PepsiCo Tells Activist Investor Its Answer Is Still No

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James Leynse for The New York Times

PepsiCo has rejected a proposal from Nelson Peltz, a prominent activist investor. Again.

In a letter to Mr. Peltz on Thursday, the company's presiding director said PepsiCo still opposed the investor's proposal for the company to spin off its North American beverage business and keep its snack food business. Last week, Mr. Peltz renewed his call for such a split, after the company said it had decided against it.

'I am writing to advise you that the board and management are comfortable and in complete alignment in rejecting your proposal,' the presiding director, Ian Cook, said in the letter to Mr. Peltz on Thursday. 'In short, the board and management have concluded that the financial engineering you propose erodes value for shareholders rather than creates value.'

Companies often take a deferential tone when one of the investors speaks up with an idea. In this case, PepsiCo used some form of the word 'reject' no fewer than three times.

Mr. Peltz's firm, Trian Fund Management, which owns 0.81 percent of PepsiCo, said last week that it would go directly to shareholders with its case for splitting the beverages and snacks businesses into two publicly traded companies. The firm said it was 'highly disappointed' with the company's decision to rebuff the proposal after a strategic review.

PepsiCo announced the results of that review this month, citing the free cash flow generated by the beverage business as one reason to keep it. Mr. Peltz, who unveiled a version of the proposal last summer, countered that the beverage business 'can generate far more cash flow under focused leadership,' if it were 'freed of allocated corporate costs and bureaucracy.'

But that argument is still not gaining traction among PepsiCo's senior ranks. In its letter on Thursday, the company said it had concluded that 'much of Trian's data is selective and, in many instances, misused.'

'We trust that you appreciate the seriousness with which we have examined your observations and proposal and the firmness with which we reject the proposal to separate the businesses,' Mr. Cook said in the letter, which was disclosed in a regulatory filing.

'We welcome our shareholders' suggestions for enhancing value,' he went on. 'However, after fully considering and rejecting your proposals, the board and management have turned their attention to running the integrated company for the benefit of all shareholders and delivering the financial commitments projected.'

A representative of Trian Fund Management declined to comment.