P&G po­larises with Peltz fight



roc­ter & Gam­ble Co. may have pre­vailed in its proxy fight against ac­tivist in­vestor Nel­son Peltz, but the con­tentious show­down has left its in­vestors as di­vided as ever.

The world’s largest con­sumer-prod­ucts com­pany said on Tues­day that Peltz fell short of the votes needed to be elected to the board, based on pre­lim­i­nary re­sults. But the in­vestor isn’t go­ing qui­etly: His firm, Trian Fund Man­age­ment, said the de­ci­sion was too close to call and that it’s wait­ing for cer­ti­fi­ca­tion by an in­de­pen­dent in­spec­tor.

Peltz ar­gued that P&G suf­fered from a bloated struc­ture and a lack of new brands favoured by younger shop­pers. While he hasn’t called for the re­place­ment of Chief Ex­ec­u­tive Of­fi­cer David Tay­lor or a break-up of the com­pany, the 75-year-old did sug­gest re­or­gan­is­ing the maker of Tide and Pam­pers into three largely au­ton­o­mous units.

Many in­vestors agreed with Peltz’s mes­sage. And re­gard­less of how they voted, the process threw a spot­light on a broader dis­sat­is­fac­tion among share­hold­ers, said Ali Dibadj, an an­a­lyst at San­ford C. Bern­stein & Co.

“They ex­pect more from the com­pany,” Dibadj said. “Tay­lor has a bit of room to de­liver on re­sults, but he’s go­ing to be in the spot­light and un­der the mi­cro­scope in a very big way over the next sev­eral quar­ters.”

Black­Rock Inc, which own about 6 per cent of the con­sumer-brands com­pany, split its vote.

Two mil­lion shares were cast for the board’s pro­posal while the re­main­der were voted in favour of Trian’s, ac­cord­ing to a per­son fa­mil­iar with the mat­ter. The firm owned about 156.4 mil­lion shares as of Oc­to­ber 6 but may not have voted all its out­stand­ing shares, the per­son said.

Peltz said he be­lieved the vote mar­gin was plus or mi­nus 1 per cent, and the sup­port he gar­nered from share­hold­ers should be a sign to Tay­lor that he de­serves a board seat.

“Even if they win, which I’m not sure they did, think about what Pyrrhic vic­tory it is,” he said in an in­ter­view on CNBC. “Every­body but the cur­rent em­ploy­ees voted for us. Up and down the line.”

Out­dated cri­tiques

Over the years, P&G has strug­gled to churn out as many block­buster prod­ucts and over­come a cul­ture of bu­reau­cracy.

But Peltz had an out­dated view of the com­pany, Tay­lor has re­peat­edly said. In a state­ment Tues­day, P&G said it’s a “much stronger, more profitable com­pany” than a few years ago. Over the years, P&G has strug­gled to churn out as many block­buster prod­ucts and over­come a cul­ture of bu­reau­cracy.

“P&G share­hold­ers have spo­ken and we re­spect their de­ci­sion,” Da­mon Jones, a com­pany spokesman, said in an email. While ac­knowl­edg­ing the vote was close, he de­clined to com­ment on whether the com­pany might ac­com­mo­date Peltz in some way, short of putting him on the board.

Peltz said on CNBC that P&G’s board didn’t give him a fair shake and never went over a 93-page white pa­per is­sued by Trian last month. He said he only met with Tay­lor and lead direc­tor James McNer­ney to dis­cuss his plans and his only other in­ter­ac­tion was with board mem­ber Ken Chenault dur­ing a brief meet­ing.

“I didn’t show them the white pa­per. We didn’t go through the white pa­per with them. They didn’t do their job,” Peltz said.

Peltz bought a $3.5 bil­lion stake in P&G ear­lier this year be­fore em­bark­ing on

An­a­lyst at San­ford C. Bern­stein & Co

the three-month board fight. P&G is only the third proxy fight by Trian since Peltz co­founded the firm in 2005. The New York hedge fund won two seats on the H.J. Heinz board in 2006 and Peltz re­mained on the board un­til 2013. Two years ago, he failed in his at­tempt to ap­point four di­rec­tors to the board of chem­i­cal maker DuPont Co.

Peltz touted his ex­pe­ri­ence on the boards of large con­sumer com­pa­nies in ad­di­tion to Heinz, in­clud­ing Mon­delez In­ter­na­tional Inc. and Wendy’s Co.

P&G said what­ever he learnt is ir­rel­e­vant since those com­pa­nies sell food, an area the com­pany ex­ited. Five for­mer Heinz di­rec­tors wrote a let­ter back­ing Peltz’s cam­paign, and he gained the sup­port of the three largest proxy-ad­vi­sory firms as well.

Trian notched a vic­tory on Mon­day with the ap­point­ment of co-founder Ed Gar­den to the board of Gen­eral Elec­tric Co.

Bill Ack­man, an­other bil­lion­aire in­vestor known for seek­ing man­age­ment changes and com­pany break-ups, said Peltz’s dif­fer­ing ideas on P&G’s strat­egy were “a per­fect rea­son to put him on the board.”

“P&G looks ter­ri­ble,” Ack­man said in an in­ter­view Mon­day. “They may win be­cause 42 per cent of the stock is held by re­tail, man­age­ment has all their names, num­bers and email ad­dresses. Many of them are prob­a­bly based in Cincin­nati. But it would be a bad thing for P&G if Nel­son isn’t on the board.”

Ack­man dis­closed a $1.8 bil­lion stake in P&G in July 2012 and pushed to re­place then-CEO Bob McDon­ald, who was pur­su­ing a $10 bil­lion cost-cut­ting pro­gramme. P&G did get rid of McDon­ald the fol­low­ing year and brought back its for­mer CEO A.G. Lafley. Ack­man di­vested his stake in 2014.

Dibadj at San­ford Bern­stein and Jack Russo, an an­a­lyst at Ed­ward Jones & Co., said they were sur­prised at how strongly P&G re­sisted giv­ing Peltz a seat at the ta­ble.

“It’s not like he’s go­ing to put his agenda through with one board seat,” Russo said. “It’s fool­ish for the com­pany to be as con­cerned about this as they were, but it’s also fool­ish to say P&G has been do­ing noth­ing. They’ve been do­ing a lot. It’s not easy to change a com­pany this size.”

Bil­lion­aire in­vestor


Trian Part­ners hedge fund man­ager Nel­son Peltz takes ques­tions from re­porters af­ter los­ing the share­holder vote for a seat on Procter & Gam­ble’s board on Tues­day.


P&G CEO David Tay­lor an­swers ques­tions at a news con­fer­ence fol­low­ing Procter & Gam­ble’s share­holder vote on Tues­day.

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