In May 2008, activist investor Nelson Peltz made waves by purchasing nearly 850,000 shares of stock in the then troubled Starbucks coffee empire.
Now he’s got a stake in both sides of the effort by Kraft Foods Inc. to buy Cadbury PLC, the British confectionary firm. And once again, it’s obvious that when Peltz moves, the market reacts.
As noted in a Muckety story last year, the Starbucks purchase made through Peltz’s Trian Fund Management LP, gave the coffee giant’s stock a boost, sending it up 6 percent.
Nelson Peltz
The jump was attributed to the belief that Peltz would pressure Starbucks management to trim costs, just as he had done as a stockholder in other companies.
(According to The Wall Street Journal, coffee mugs at Trian say “sales up … expenses down” on one side and “cash is king” on the other.)
Three months later, Peltz sold his Starbucks shares, and just as his buy drove up the stock price, so did his sell, as the stock rose 5 percent.
Analysts at the time argued that the sell reflected Peltz’s belief that Starbucks management was getting its house in order and didn’t need him urging them on.
Regardless, the 67-year-old Peltz came out about even on the deal.
Now Peltz is a player in the Kraft/Cadbury corporate drama.
Kraft’s recent offer of $16.7 billion was rejected by Cadbury, but Kraft has said it will pursue the takeover. News of the bid has sent Cadbury’s stock up nearly 40 percent; Kraft’s has fallen 7 percent.
Since 2007, Trian Fund has held stock in each of the companies, buying 3.5 percent of Cadbury and 3 percent of Kraft.
Trian consented to a standstill agreement that prevented it from pressuring Kraft to make changes before the end of October 2009.
However, the firm has quietly urged Kraft “to pare its large portfolio of brands and expand its global reach with an acquisition,” according to the Journal. The purchase of Cadbury would seem to fit the acquisition goal.
At the same time, Peltz has pressured Cadbury to sell off its beverage interests, which it did last year by spinning off its Dr. Pepper, a unit that included Snapple.
In doing this, Cadbury unloaded brands that it had purchased from Triarc Companies Inc., another of Peltz’s companies.
Since 2007, Peltz has reduced his stake in Kraft from 3 percent to O.6 percent, while his stake in Cadbury remains at 3.5 percent. Given the rise in Cadbury’s stock, and the fall in Kraft’s, he would seem to have put his money on the right horse.
Peltz has not spoken publicly on Kraft’s run at Cadbury, but Warren Buffett, the billionaire investor who owns a 10 percent stake in Kraft, commented this week on the possible takeover.
Buffett told CNBC that the $16.7 billion offer should be considered a “full price” and that Kraft management would have to do “a lot of things to justify this price.”
At the same time, Buffett expressed confidence in Irene B. Rosenfeld, Kraft’s CEO.
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