Markets

Trian's Peltz seeks a seat on board at Procter & Gamble

Trian's Peltz seeks a seat on board at Procter & Gamble

The firm, which initially revealed its position in February, now holds 37.6 million P&G shares, or about 1.5 percent. Monday, the bank named a new chief executive, Charles Scharf.

For instance, Peltz acknowledged during a CNBC interview that P&G is a "great company" that's backed by a "phenomenal" CEO David Taylor who hasn't yet lived up to his full potential.

"Structural and organizational bureaucracy may be preventing management from identifying and responding to commercial opportunities in a timely manner, hindering product innovation and dampening sales growth", Trian said in the filing.

The company, which is based in Cincinnati and whose brands include Gillette, Tide and Pampers, is struggling to navigate changing consumer habits. DuPont argued Trian would be "shadow management" in the boardroom and said it didn't need Trian because its board had proven it was willing to make changes on its own. The shares gained 0.6 percent to $87.59 in early trading in NY after the filing was posted.

P&G has increased operating profit margins, to 20.6% a year ago from 19.1% in 2011, and says it ranks third in the industry - behind competitors that also charge high premiums. "Now, it'll be in for a fight", said Bernstein Research analyst Ali Dibadj.

Trian hired former P&G Chief Financial Officer Clayton Daley to advise on the matter. It seeks a board seat at almost all of its companies so that it can tap the "perfect information" only insiders have and can change the discussion about what is working and what isn't. Peltz's fund has also invested in PepsiCo - a stake that it said previous year it no longer held - as well as Wendy's, Mondelez International and General Electric.




Weak Total Shareholder Returns.

And here lies the problem and the foundation of Peltz's activist campaign. The company later announced a $60 billion merger with Dow Chemical Co. Last week, P&G officially declined to give Peltz a seat on the board.

Trian doesn't typically take part in proxy fights and often simply provides advice. Since it started in 2005, it has only had two prior proxy fights - with H.J. Heinz Co. and DuPont Co. - and there were almost 10 years between them.

Trian says PG last week rejected its demand to name Peltz a director, which Deutsche Bank sees as "a sign that management is confident in its strategy and is unlikely to miss expectations over at least the next few months".

It's not the first time P&G has been targeted for a shake-up. But the focus is rally on P&G's cost cutting efforts, with Peltz arguing that the company failed to capitalize on its cost-cutting efforts over the past five years. Currency exchange rates have diluted the impact of the $10 billion in cost cuts P&G delivered over the past five years, and now it seems fair "to question the benefit of re-investing those savings, particularly as sales and earnings growth have only decelerated over this time frame, according to Lieberman".

Yet sales and profit growth have remained elusive.


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