Missing the Point on Peltz's Sale of Heinz Shares

Peltz is Getting Liquid, the Question is Why?

In Barron’s writer Avi Salzman‘s recent Inside Scoop piece “Peltz Cuts Back on Ketchup Giant” there is a major missed opportunity to put the story into a broader context that is way more interesting than the article’s original premise.

Writing about some recent sales of Heinz (HNZ) stock by Nelson Peltz of the Trian Companies, Salzman asks the question of whether or not something may be wrong with Heinz.  The story seems to make much of the fact that Peltz is a “hands-on” investor, so if something is prompting him to be liquidating $63 million of Heinz stock, then maybe other shareholders should be concerned.  There is also some discussion about Peltz’s recent acquisition of the Wendy’s burger chain.  All of this is, frankly, beside the point.

What Salzman doesn’t ask in the article is the really interesting question:

“What is Nelson Peltz getting liquid for?“

I think the answer might be a major investment and effort at Dr Pepper Snapple Group (DPS).

As anyone knows who has followed the illustrious career of Nelson Peltz, one of the most successful activists of all time, he is rarely idle and is always thinking about great brands and how he can suffuse the companies behind those brands with more efficiency.

Peltz has added to the shares of DPS he received in connection with his Cadbury Schweppes holdings when they spun the beverage company off and has filed a 13D indicating that he seeks an active role at the company.  He now controls 18 million shares, or just over 7% of the company. 

Barron’s itself has written about this briefly on it’s 13d Filings page recently.

Peltz does not fire off Daniel Loeb-style love letters filled with malice, personal insults and threats (although those are sometimes called for when shareholders are being serially abused).  Instead, he is typically patient and cooperative, adding shares of stock on dips and steadily picking up board seats at each voting opportunity.  His MO is simple: he will take his time and attempt to work constructively with management, but ultimately, his ideas will be heard and acted upon by the boss (like Heinz), or he will become the boss himself (like Wendy’s).

If Peltz is getting liquid by selling Heinz stock, I’d be looking at the Dr Pepper Snapple Group as a possible target for that cash.  Keep in mind that Peltz may still have quite an affinity for the Snapple component of this company as he once owned it and turned it around, which was one of the most profitable episodes of his career.

I’ll be watching for more developments as we get closer to the company’s annual meeting in May.

That may turn out to be the real inside scoop.

Full Disclosure:  I have no position in HNZ.  I am currently long DPS in client accounts and plan to continue to purchase shares.  This article is in no way an invitation to buy or sell securities.  Please see this site’s Terms and Conditions page for a more detailed disclaimer: Terms & Conditions

Read the original Article Here:  Heinz in Barron’s