P&G faces board seat fight from Peltz's Trian

Investor wants to shake up 'slow-moving' culture

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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.

Cincinnati-based P&G manufactures Oral-B and other brand-name products in Iowa City.

Trian will seek a seat for Peltz at P&G’s annual shareholder meeting, according to a proxy filing Monday with the Securities and Exchange Commission. The company, which initially revealed its position in February, now holds 37.6 million P&G shares, or about 1.5 percent. It’s not seeking a breakup of the company or a new chief executive officer, but rather to shake up its “slow-moving and insular” culture, according to the filing.

P&G CEO David Taylor is struggling to reignite sales growth at the maker of Tide laundry detergent and Pampers diapers as it faces assaults from cheaper rival brands and retailers that are keeping a tighter rein on inventory to defend themselves from online competition.

P&G shares are showing a 5.1 percent total return for shareholders since the start of the year, trailing gains of 29 percent for Unilever in local currency terms, and 12 percent for Colgate-Palmolive, according to data compiled by Bloomberg.

“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 consumer company said it has “maintained an active and constructive dialogue” with Trian since its investment, according to a statement Monday.

“P&G’s board and management team are keenly focused on executing the company’s strategy to drive innovation, accelerate organic sales and volume growth, improve productivity and cost structure, and strengthen P&G’s organization and culture. The board is confident that the changes being made are producing results, and expresses complete support for the company’s strategy, plans, and management.”

With a market capitalization of $223 billion, P&G would be the largest company to face a board seat proxy fight. The shares gained 0.6 percent to $87.59 in early trading in New York after the filing was posted.

Consumer companies are becoming increasingly attractive to activists. Dan Loeb’s Third Point disclosed last month that it had amassed a $3.5 billion stake in Nestle, encouraging the company to sell its stake in cosmetics maker L’Oreal and increase leverage for share buybacks. Peltz’s fund also has invested in PepsiCo — a stake that it said last year it no longer held — as well as Wendy’s, Mondelez International and General Electric.

Earlier this year, Unilever, which owns the Ben & Jerry’s ice cream and Dove personal-care brands, fended off an unwanted takeover approach from Kraft Heinz Co., prompting the Anglo-Dutch giant to say it would take steps to improve shareholder returns.

Some of Peltz’s previous campaigns with U.S. corporate giants have yielded results. Jeffrey Immelt said last month that he would step down as chairman and CEO of GE after Trian criticized what it described as the conglomerate’s underperformance.

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