8-KOther EventsExhibits & Filings

PEPSICO INC 8-K Report, Corporate Update (May 11, 2009)

Filed May 11, 2009For Securities:PEP

Summary

PepsiCo, Inc. (PEP) has filed a legal complaint in the Delaware Court of Chancery against The Pepsi Bottling Group, Inc. (PBG) and its board of directors. The core of the dispute centers on allegations that PBG's board breached its fiduciary duties to PBG shareholders by holding a board meeting without proper notice to two PepsiCo-appointed directors and by adopting a shareholder rights plan. PepsiCo argues this plan unfairly restricts its ability to solicit consents and proxies, hindering its non-coercive offer to acquire PBG. The company is seeking declaratory relief to invalidate actions taken at the improperly noticed meeting and to render certain provisions of the shareholder rights plan invalid. Furthermore, PepsiCo is requesting injunctive relief to prevent PBG from holding future meetings without proper notice and from enforcing the restrictive aspects of the rights plan, ultimately aiming to compel the cancellation of the plan. This legal action signifies a significant development in PepsiCo's efforts to acquire PBG.

Key Highlights

  • 1PepsiCo filed a legal complaint against The Pepsi Bottling Group (PBG) and its board of directors.
  • 2The lawsuit alleges breach of fiduciary duties by PBG's board concerning a recent meeting and the adoption of a shareholder rights plan.
  • 3PepsiCo claims PBG's board meeting was held without proper notice to PepsiCo-appointed directors.
  • 4A key dispute involves a new shareholder rights plan that PepsiCo states restricts its ability to solicit proxies and consents.
  • 5PepsiCo contends the rights plan is an unreasonable response to its acquisition offer for PBG.
  • 6The company is seeking court orders to nullify actions from the disputed meeting and invalidate restrictive provisions of the rights plan.
  • 7PepsiCo also seeks to enjoin PBG from enforcing the rights plan and to compel its cancellation.

Frequently Asked Questions

PepsiCo filed the lawsuit alleging that the PBG board of directors breached their fiduciary duties to PBG shareholders. Specifically, PepsiCo claims PBG's board held a meeting without notifying two PepsiCo-appointed directors and adopted a shareholder rights plan that unfairly restricts PepsiCo's ability to pursue its acquisition offer for PBG.

PepsiCo is seeking declaratory relief to declare actions taken at the improperly noticed PBG board meeting as void, and to invalidate provisions of the shareholder rights plan that infringe on PepsiCo's voting rights. It also seeks injunctive relief to prevent PBG from holding future meetings without proper notice and from enforcing the restrictive elements of the rights plan, ultimately aiming to have the plan cancelled.

PepsiCo alleges that the shareholder rights plan adopted by PBG's board is designed to hinder its non-coercive offer to acquire PBG. The plan restricts PepsiCo's ability to solicit consents and revocable proxies from fewer than ten shareholders, which PepsiCo views as an unreasonable impediment to its acquisition efforts.

The filing specifically mentions John C. Compton and Cynthia M. Trudell as PepsiCo employees who are directors of PBG and were allegedly not provided notice for the board meeting. The lawsuit is filed against the other PBG board members (the 'director defendants').