P&G Responds To 'Outdated' Nelson Peltz Comments

Procter & Gamble Procter and Gamble Signage outside Procter & Gamble corporate headquarters in downtown Cincinnati. Procter & Gamble reports financial results Earns Procter Gamble Cincinnati USA

Activist investor Nelson Peltz, who holds a stake in Procter & Gamble of $3.5 billion, or around 1% of shares outstanding, continued his campaign for a board seat, laying out his concerns regarding organizational structure, corporate governance, and recent financial performance in a proposal released September 6.

In a 93-page plan for improving the business, Peltz's Trian Partners recommended P&G be organised into three largely autonomous business units and that the company should invest in smaller, high-growth brands and prioritise its online strategy.

The company added: "P&G is confident it has the right plan, the right structure and the right Board in place to continue its successful transformation and deliver results and shareholder value for the short-, mid- and long term".

Shareholders will vote on October 10 on whether to add Peltz to the board.

Trian, P&G's fifth-largest shareholder, also said the company's management compensation plan is tied to three-year goals that are set too low.


Peltz is hoping to win a seat on the board at P&G's annual meeting next month, and chip away at what he calls the company's "insular" culture.

But P&G has said Peltz's paper is "nothing substantive", and that his recommendations would only create more complexities in the firm's management.

Peltz wants to split P&G into beauty, home-care and family-care units - each with regional leaders, which he contends will spur innovation.

Trian revealed a $3.5 billion stake in $236 billion P&G in July. The company should also examine why it has failed to innovate after failing "to create a new meaningful brand in almost 20 years". The three business divisions would sit under a holding company, which controls public company functions and costs, Trian said. Net, we remain Equal-weight on PG as we believe potential benefits from Trian are already priced into PG's stock at 14.7x2018 EBITDA, particularly given PG is resisting efforts to add Peltz to the board, and HPC industry trends are under pressure with increasing brand fragmentation, as well as a more competitive industry environment.

Trian has taken swipes previously at P&G's bureaucracy and stock performance compared to peers, a dig it repeated in its plan, citing a total shareholder return over the last decade that trailed both peers and the S&P 500.

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