Pepsi shares jump on merger speculation

The Associated Press

PepsiCo Inc.'s shares jumped Friday as investors bet on reports that the company might be looking at a big snack deal.

THE SPARK: The Telegraph of London newspaper, citing unnamed sources, said activist investor Nelson Peltz has been building stakes in Pepsi and Mondelez International Inc. in recent weeks and could push Pepsi to merge with Mondelez, which makes Oreo cookies and Nabisco snacks.

THE BIG PICTURE: Peltz is known for making big investments and then forcing change. PepsiCo issued a statement Friday saying it isn't interested in any big acquisitions.

The Purchase, N.Y., company has long been the subject of speculation that it would spin off its underperforming beverage business and focus on its other brands, like Frito-Lay and Quaker.

CEO Indra Nooyi tried to quash such talk last year with a "Power of One" marketing campaign that featured the company's sodas alongside its chips. But PepsiCo has nevertheless been reviewing options to restructure its North American beverage business and recently said it would provide more information on that early next year.

"We certainly wouldn't want to make a change in the business structure while there's still opportunities to unlock value that might be better unlocked while PepsiCo still owns the business," Chief Financial Officer Hugh Johnston said in a call with reporters in February.

Mondelez, which split from Kraft Foods Group Inc. last year, also said it was satisfied with its portfolio as it stands. A representative for Peltz's Trian Fund Management declined to comment.

SHARE ACTION: PepsiCo rose $2.52, or 3.3 percent, to close at $78.67. Its shares rose to a 52-week high of $79.27 earlier in the session. Mondelez shares climbed by $1.17, or 4.1 percent to close at $29.73.