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The dispute between food and beverage giant, PepsiCo, Inc. (PEP - Analyst Report) and its majority stake holder, Nelson Peltz to split the former’s beverage and snacks businesses seems to be going on forever.

In mid February, Peltz, renewed his campaign to push Pepsi to separate its underperforming beverage business from the stronger snacks business. Per media sources, Peltz in a 37-page letter to Pepsi’s board, urged that the two businesses be separated to enable the company to concentrate on snacks, thereby accelerating its sales and profits. He argued that a split would “create two leaner and more entrepreneurial companies”. Peltz also warned about taking the case directly to shareholders.

However, Pepsi’s board once again rejected Peltz’s proposal to split the company, as per media reports. Last week, in a letter to the activist investor, Ian Cook, presiding director of Pepsi's board, told that the two businesses were better together and splitting the two would erode instead or creating shareholder value.

Cook’s letter supports the stance taken by Pepsi chief, Indra Nooyi at the fourth quarter conference call in mid February. During the call, Nooyi announced that retaining the American beverage business would be in the best interests of the company. As per media sources, Peltz was highly disappointed with Nooyi’s decision, instigating him to send the 37-page letter.

Peltz’s investment company, Trian Fund Management, holds major stake in Pepsi. Shifting consumer preferences toward health and wellness and “good-for-you” products is lowering the demand for high-calorie soft drinks, especially in North America. Thus, beverage giants like Pepsi and The Coca-Cola Company (KO - Analyst Report) are witnessing declining sales of carbonated beverages, especially the colas. Peltz feels Pepsi’s underperforming beverage business is overshadowing its fast growing snack unit.

Peltz has been pressuring Nooyi for months to split the two businesses. Earlier, Peltz had pushed Pepsi to buy global snacks company, Mondelez International, Inc. (MDLZ - Analyst Report). However, he put off this agenda after joining the former’s board in January this year. Trian Fund Management also holds major stake in Mondelez.

Previously known as Kraft Foods, Inc., Mondelez changed the name following the spin-off of its North American grocery business into a separate independent company, Kraft Foods Group, Inc. (KRFT - Analyst Report) in Oct 2012.

Currently, Pepsi carries a Zacks Rank #3 (Hold).

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