Will This Force Pepsi to Split in Two?


The following video is part of our "Motley Fool Conversations" series, in which consumer-goods editor and analyst Austin Smith and industrials editor and analyst Brendan Byrnes discuss topics around the investing world.

In today's edition, Austin and Brendan discuss the wedge that may force PepsiCo to split in two. Activist investor Ralph Whitworth has taken a relatively large stake in the food and beverage giant through Relational Investors LLC. Whitworth is a veteran activist and has pushed for change with both ITT and L-3 Communications. After acquiring a large stake in Hewlett-Packard, he was appointed to its board. While it's not totally clear what sort of a change he's agitating for with PepsiCo, the obvious cause would be for a division of the snack and beverage divisions into two separate entities. Austin sees the rationale behind it but prefers to see both companies remain under one banner. Despite the lower margins that come with the snacks division, the distribution synergies are hard to replicate.

PepsiCo, despite underperforming Coca-Cola in recent years, still has a lot going for it -- one of the most appetizing of which is its impressive dividend, which outpaces Coca-Cola's. That's one of the reasons it was named as one of The Motley Fool's 9 Rock-Solid Dividends. You can learn more about these incredible wealth builders by clicking here now.

At the time thisarticle was published Austin Smithowns shares of Coca-Cola and PepsiCo.Brendan Byrneshas no positions in the stocks mentioned above. The Motley Fool owns shares of Coca-Cola, L-3 Communications Holdings, and PepsiCo.Motley Fool newsletter services recommendPepsiCo and Coca-Cola. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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