Is Dr Pepper Peltz's Next Patient?

Is investor Nelson Peltz getting ready to buy a big chunk of Dr Pepper/Snapple Group? Joshua Morgan Brown, a writer at SeekingAlpha (and a stock trader who owns Dr Pepper shares) speculates that he is.

There’s no telling if he’s right, but there is probably something to his underlying point that Peltz – the food industry’s most active activist investor — is getting ready to do something, somewhere. Last week, Peltz’s Trian Fund Management sold off 21 percent of its stake in Heinz, leaving him with about 2 percent of the company of which he had owned 5.4 percent early last year. Barron’s, doing a little speculation of its own, wondered whether this meant that Peltz has “lost his taste for Heinz,” where he has become a friendly insider with two board seats since the proxy battles he waged there three years ago, when he first barged in on the company.

But as Morgan notes, it’s much more likely that Peltz is simply moving on to his next target, and his sale of Heinz shares is simply fund-raising. Peltz, he notes is “rarely idle and is always thinking about great brands and how he can suffuse the companies behind those brands with more efficiency.”

After three years, Heinz is pretty well efficiency-suffused. Peltz’s mission is to take on companies (many of them in the food and restaurant businesses) that have lots of potential value, shake them up, gain some board seats, and force managers to cut costs. His exit may be an outright acquisition (as his Triarc Companies did with Wendy’s, combining it with Arby’s, which it already owned, to create Wendy’s/Arby’s Group), or it may be to simply sell off all or part of his stake – whether or not he believes he might see more gains by holding it. He’s not a stock trader.

As to whether Dr Pepper is a likely target, Morgan is on somewhat shakier ground, but he makes a decent case. Peltz has been buying Dr Pepper shares, adding to those he had held when it was spun off (at his insistence) from Cadbury Schweppes last year. He now owns about 7 percent of Dr Pepper, and last month he filed a 13d form indicating that he’s seeking an active role at the company.

Morgan doesn’t give much else in the way of evidence, though, and Dr Pepper is just one of many plays Peltz may have in mind. He’s been known to take fairly big stakes in companies, research them from the inside, then get out. And that could be the case here. But he’s probably getting ready to do something fairly big.