Trian Fund Management’s Nelson Peltz files for a proxy contest seeking a board seat at Procter & Gamble.
A billionaire investor known for forcing company boards to revamp their businesses has thrown down the gauntlet at Procter & Gamble. Nelson Peltz’s $12.7 billion hedge fund, Trian Partners, is seeking to elect Peltz to P&G’s board of directors, according to a regulatory filing released Monday. The filing came after the company rejected his request to be added to the board.
« When you have that many brands, they tend to start to get commoditized. They start to lose market share, » Peltz said on CNBC’s » Squawk on the Street. » « P&G because of its suffocating bureaucracy, because of its matrix organization… it is structured improperly. »
« We have a track record at Trian in the spaces that we operate in, especially in the consumer space, » Peltz added. Procter & Gamble, whose share price was flat Monday following the filing, has a market value of $222.8 billion, according to FactSet. Trian Fund Management owns approximately $3.3 billion worth of P&G shares, according to the filing. The consumer packaged goods company’s brands include Tide detergent, Gillette razors and Pampers diapers.
The battle for the board seat will be put to P&G’s shareholders for a vote. P&G is the largest U. S. company to be the target of such a campaign.
The company has been struggling to increase sales at the same time it is restructuring. In the filing, Trian said: « As one of P&G’s largest shareholders, and given P&G’s disappointing results over the past decade, Trian has a keen interest in helping the Company address the challenges it is facing. »
« P&G’s challenges stem in large part from its organizational structure and culture, which can be highly resistant to change, » the firm added. « Trian believes the job of a highly engaged shareowner in the boardroom is to foster a true sense of ownership among directors and inspire the board to take decisive and timely action to create sustainable, long-term value for both the company and its shareholders. » Trian noted that it has had « numerous constructive meetings and discussions » with P&G in the previous four months. Procter & Gamble’s stock has underperformed the market. Its shares are up 3.6 percent this year through Friday versus the S&P 500’s 9.9 percent rise. In the past 12 months, the stock is up 1.3 percent compared with the market’s 13.8 percent return. « As a member of the Board, it would be my goal to help improve performance by increasing sales and profits and regaining lost market share. I also believe the Board must address the company’s structure and culture. I can add far more value operating within the P&G boardroom than by merely looking in from the outside, » Peltz wrote in the preliminary proxy statement. « Trian still hopes to avoid the distraction of a proxy contest for the sake of all constituencies. » The hedge fund firm also emphasized it is not recommending a company breakup or a CEO change at Procter & Gamble. Citing a source close to the matter, CNBC’s Sara Eisen reported in June that Peltz filed a notice for a board seat at Proctor & Gamble. P&G isn’t the only large Trian holding going through turmoil. The firm owns nearly $2 billion in General Electric, which announced last month that Chairman and CEO Jeff Immelt will step down and be replaced by company veteran John Flannery. Procter & Gamble released the following statement when asked for comment on Trian’s filing:
