Proxy Fights Are a Rarity for Peltz's Trian

Ross Houston
July 17, 2017

Nelson Peltz's Trian Fund Management began a proxy fight to win a board seat at Procter & Gamble, characterizing the maker of detergents and diapers as a lumbering giant whose stock has underperformed its peers. "The board is confident that the changes being made are producing results, and expresses complete support for the company's strategy, plans, and management".

The filing sets up a proxy fight in which shareholders will be asked to decide whether to add Peltz as a 12 board member, representing Trian Partners, a NY fund that owns more than $3 billion in P&G shares. Peltz's fund has also invested in PepsiCo - a stake that it said a year ago it no longer held - as well as Wendy's, Mondelez International and General Electric. The company is structured improperly as a "matrix organization" and needs help to better position itself for growth. Trian's previous battle with a consumer goods conglomerate was with PepsiCo Inc, where it pressured the company to spin off its beverage business from its snacks division, a campaign that the company never heeded though it did hand the investor a board seat in 2015 to make peace. P&G's proxy filing, disclosed on Monday, shows that Trian's dialogue with the company goes back to February 16, when Peltz called Taylor shortly after disclosing the stake to make the introduction and set up an in-person meeting. P&G's quarterly organic sales, which excludes acquisitions and divestitures, has fallen just once during his one and half years at the helm. Trian said it was disappointed by the rejection and advised those in attendance it would push ahead with a proxy fight. "They start to lose market share", Peltz tells CNBC. P&G is growing its online presence and has fought back with price cuts, but its stock price has lagged competitors and the S&P 500 in the past year, and - as Peltz points out - over the past decade. "I like the man".

Calling P&G's financial results over the last decade "disappointing", Trian cited weak shareholder returns, deteriorating market share and excessive cost and bureaucracy in the Securities and Exchange Commission filing that announced the challenge. Trian said it is concerned that $13 billion of identified cost savings will not materialize given an "overly complex organizational structure and a slow moving and insular culture".

Trian, which manages $10 billion, said it had numerous discussions with P&G management and some board members over the past four months after an initial meeting attended by Peltz, co-founder Ed Garden, P&G CEO Taylor and CFO Jon Moeller on March 7.

Company executives have been implementing a strategy to sell off lower-selling brands and refocus P&G on its 65 top-selling labels, including Pampers and Tide.

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