The oracle from Trian, famed investor Nelson Peltz, would like a seat on the PG board. Judging by PG’s tepid stock performance, +5% YTD, I don’t see why people shouldn’t give olde Nelson a chance to shake things up.
He’s launched a proxy battle for the hearts and minds of shareholders today.
Here are the details.
As of the date of this Proxy Statement, the members of the Trian Group beneficially own an aggregate of 37,612,012 Shares. As one of the Company’s largest shareholders and given P&G’s disappointing results over the past decade, as detailed below, we have a keen interest in helping the Company address the challenges it is facing, which include:
Weak Total Shareholder Returns. Over the past decade, the Company has underperformed relative to both its peers and to the S&P 500. In fact, the Company’s total return to shareholders over the last ten years was less than half that of its peers. We believe P&G needs to address the factors contributing to this consistent underperformance.
Deteriorating Market Share. Over the past five years, P&G’s organic sales growth has decelerated and the Company has lost market share across most of its categories. The Trian Group believes that disruptive and existential threats are impacting the entire consumer packaged goods industry, including changes in technology and consumer behavior, and the Company must act with the greatest possible urgency to address the market share it is losing to both its peers and smaller local competitors, who are adapting to industry changes more effectively than P&G.
Excessive Cost and Bureaucracy. The Company’s management acknowledges the need to reduce cost and bureaucracy, but it is clear to us that these critical issues have not been sufficiently addressed.
· Trian’s analysis shows that the Company’s $10 billion cost-cutting program, launched in 2012, has had no discernible impact on profits or sales growth. In particular, the program did not drive earnings growth given that operating profit was essentially flat from 2012 to 2016.
· Although the Company has stated that it has identified up to $13 billion of additional cost savings, given P&G’s track record, the Trian Group is concerned that this initiative will be as ineffective as the 2012 program in driving sales growth, earnings growth and shareholder value creation.
In an interview with CNBC this morning, Peltz said the company is ‘inappropriately structured’ and a ‘suffocating bureaucracy’ was hurting PG shareholders. He said the company had too many large brands and they had become commoditized.
Obnoxiously, both Jim Cramer and Mark Faber tried to attribute PG’s underperformance stemming from the fact that they’re based in Ohio, with Faber suggesting a lack of available talent had hurt the company. Cramer also said the company might not be ‘worldly’ enough’, like it chief competitor Unilever.
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