Trian Fund Management, under Nelson Peltz, owns a stake more than $1.3 billion in shares of PepsiCo Inc. (NYSE: PEP). Now the fund group is becoming more of an activist as the group has just issued a so-called white paper recommendation to drive more shareholder value at PepsiCo. The strategic alternatives includes a merger, but whether that happens or not it is calling for the breakup of the business into a snack foods business and a beverage business.

The move would make two companies with more specific competitors. This would be a direct apples-to-apples competitor for The Coca-Cola Co. (NYSE: KO) and more like Mondelez International Inc. (NASDAQ: MDLZ) on the beverage side (if the primary move works).

Today’s proposal is one which has at least loosely been discussed by others in the past but one which may start to gather more steam ahead. We would note that Chairman and CEO Indra Nooyi has addressed this before. She is vehemently against this approach.

Thursday’s release said:

Trian believes PepsiCo is a world-class company which has a history of making bold and strategic value-enhancing moves, such as the acquisition of Frito-Lay and the separation of YUM! Brands. Trian respects PepsiCo’s management team and has had a constructive relationship with them since 2008.

Trian is calling PepsiCo’s current structure “increasingly unmanageable” with 22 different billion dollar brands that is underperforming its peers. Trian calls the snacks business the fast-growing part and beverages the slow-growth outfit. The move today is definitely the beginning of deeper activism because it is quoted as being “in the spirit of open and constructive dialogue with all shareholders” and it said this white paper is being made public. The firm even said that it has, in ongoing discussions with PepsiCo, urged the company to consider the following strategic alternatives to enhance shareholder value:

Alternative A: Trian believes the way to maximize value at PepsiCo would be to merge PepsiCo with Mondelez International Inc. (NASDAQ: MDLZ) … then use this merger as a catalyst to spin off its beverages business to “create substantial cost and revenue synergies and the opportunity for margin and capital structure efficiencies.”

Alternative B: On a no-Mondelez basis, Trian believes Pepsico must still separate its snacks and beverages businesses apart.

Trian estimates that the first plan could lead to approximately $175 per share for PepsiCo and approximately $72 of implied value per Mondelez share by the end of 2015. Trian also specifically said that PepsiCo has indicated that it is not inclined to pursue a Mondelez transaction. The “Alternative B” was projected to lead to approximately $136 to $144 of implied value per share by the end of 2015.

PepsiCo shares were up 1.7% at $85.47 against a 52-week trading range of $67.39 to $85.50 and we would note that the year high was on Wednesday. It is worth noting that PepsiCo shares trade at 19.4-times expected 2013 earnings and Coca-Cola trades at 19.3-times expected earnings. Both companies offer a dividend of roughly 2.7%.

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