CalSTRS Fighting For Changes At PepsiCo After Underwhelming Performance

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The California State Teacher’s Retirement System (CalSTRS) owns a $250 million dollar stake in PepsiCo. That makes the fund one of the corporation’s 60 largest shareholders, and it means that the fund’s opinions hold a certain power with PepsiCo—a power that they are now attempting to use after becoming dissatisfied with PepsiCo’s performance of late.

From the Financial Times:

One of the US’s largest pension funds has asked Pepsi to give activist investor Nelson Peltz a seat on the board, after becoming disillusioned with the soft drinks maker’s performance.

Although Mr Peltz’s investment firm, Trian Partners, has made little headway in its year-long battle to persuade Pepsi to split off its snacks business, his meetings with scores of shareholders have persuaded some that his voice should at least be heard in the boardroom.

Calstrs is not backing the break-up call, but wrote in a letter dated June 30 that Trian could help Pepsi address its operational performance and open management to new ideas.

“Trian has a long history of doing very well at these food and beverage companies,” said Aiesha Mastagni, investment officer at Calstrs, who wrote the letter, citing its previous activist positions at Heinz, Snapple and Kraft.

CalSTRS isn’t the only major shareholder looking for change. A few other major players have come forward in favor of change, albeit anonymously. From FT:

[CalSTRS’] concerns were echoed by top 10 shareholders who did not want to be identified.

One said: “They are good shareholders and they have ideas worth looking at, so we are hoping everybody comes together.”

Another top 10 investor explicitly backed the idea of a board seat for Trian, saying Pepsi could learn from the investor’s industry experience while Mr Peltz could learn more about the business before continuing his campaign to split it in two.

“The bigger issue is leadership,” this shareholder said. “The CEO does not have the respect of the investor community. If Trian were on the board, maybe she would listen. I would like to think she is still flexible enough to adapt.”

CalPERS is also a major PepsiCo shareholder. But the fund has stayed on the sidelines during this ordeal and has no plans to join CalSTRS’ corner.