Ok. Nelson Peltz, having formed an activist alliance between his Trian Fund Management vehicle and Qatar’s sovereign wealth fund, wants the board of Cadbury-Schweppes to know something. In a letter to directors, published on Tuesday, Peltz et al declare that:
…should Cadbury fail to demonstrate meaningful operational progress in 2008 that translates to the bottom line, Trian will look to become significantly more active in evaluating all of our alternatives as a large shareholder.
Six paragraphs lower down the missive – having set out their demands that Cadbury set near-term margin targets for its confectionery business, increase medium and long-term confectionery margin goals, continue cost reduction efforts and transformation of the beverage business, add several new directors to the board, recapitalise the balance sheet and return capital to shareholders – Peltz and his Trian co-founders, Peter May and Ed Garden, say it again:
If management and the Board fail to make progress in the coming months on their initiatives and the plans we have outlined, Trian will look to become significantly more active in evaluating all of our alternatives as a large shareholder.
Now, they’re not actually that large. Trian and the Qataris speak for 4.5 per cent of Cadbury, up from 3.5 per cent at the last count, and the holding is through derivatives rather than paid up stock.
But it’s the prose that counts here – and the fact that Trian have published their detailed demands. The activists reckon the stock should be trading nearer 970p, against the 624p market quote on Tuesday – up 16p on the day.
The message is ‘work harder and quicker’ and don’t even think about trying to ignore us:
As you know, Trian has engaged in a regular dialogue with Cadbury’s management and certain members of the Board for the past nine months and supports many of the Company’s announced plans. Trian is nevertheless concerned that recent management updates to shareholders on the performance of the business seem to be followed by declines in the share price. This was the case after last week’s trading update (the stock price has since fallen 32p) and was also the case following the August 1st release of interim results (the stock price fell 51p, the largest one-day decline in more than 15 years). We believe this trend signals that management’s credibility with the Company’s shareholders is still very low.
The full text of the letter is here.