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Will Nelson Peltz Nurse Starbucks To Health?


Billionaire investor takes stake in coffee chain.


The name Nelson Peltz may not ring a bell to most. However, Peltz has taken significant positions in -- and agitated for change -- at some of America's largest, best known companies. Triarc Companies (TRY) (where he serves as non-executive chairman and is a large shareholder), for example, recently announced it's buying burger chain Wendy's. Prior to that, he reportedly pushed Wendy's to spin off its Tim Horton (THI) doughnut business.

He's also pushed for and received board seats at H.J. Heinz (HNZ), the ketchup company, and crusaded for Cadbury Schweppes to separate its candy business from its American beverage unit. Recently, news reports suggest he's been eyeing a stake in Cheesecake Factory (CAKE).

Now it looks like he may have his sights set on Starbucks (SBUX). According to CNBC:

In a filing with the Securities and Exchange Commission Thursday, Peltz's Trian Fund reported it purchased 842,070 shares as of March 31. According to a May 5 regulatory filing, Starbucks has about 728 million shares outstanding, Trian's stake represents about one tenth of 1 percent of the company's shares.

The big question seems to be whether Peltz will act as an investor, seek board seats, bid for the company outright or do something none of us have thought of. Rumors are starting to swirl.

So what does Peltz see in Starbucks?

It's impossible to speak for the man, but he does seem to have a special spot in his heart for big name, quality companies going through a rough patch. The aforementioned Wendy's being a great example.

Starbucks has fallen on some trying times. Its stock price is evidence of that. The slowing economy, rising dairy prices and stiffening competition from the likes of McDonald's (MCD), which has recently made a big coffee push, are likely to blame.

What good can Peltz do for the common shareholder? There are no guarantees, but holding the board's and management's feet to the fire might be a good thing. In fact, given its recent quarterly results and double-digit decline in bottom line, it seems like Starbucks needs some help - now!

But there's a potential downside. It was in the middle of 2007 or thereabouts when Peltz first started kicking the tires at Wendy's. Based on the news flow around that time there was this feel that a transaction of some sort could be imminent. But guess what? It wasn't until the spring of 2008 that a deal was ultimately hammered out. The point: Peltz isn't a trader and, honestly, operates a little slow.

When it comes to Starbucks, it could likewise take time for something to happen - if anything happens at all.

Peltz's involvement certainly seems like a good thing. After all, Starbucks can use all the help it can get these days. That said, there are no guarantees that Peltz's stake will bear fruit for the common stockholder.

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