DALLAS (Reuters Breakingviews) - Corporate agitator Nelson Peltz is opting for the close shave at Procter & Gamble. Unlike his last proxy fight at DuPont, the activist’s Trian Partners, which owns a $3.3 billion stake, is taking a more surgical approach to the $223 billion razors-to-detergent company, lobbying for a single board seat. Trian is also dangling niceties, like promising to support management and not calling for a breakup. Given Procter’s myriad challenges, shareholders would be silly to pass on his assistance.
The Cincinnati-based group whose brands include Gillette, Tide and Pampers, is struggling to navigate changing consumer habits. Upstarts like Dollar Shave Club have cut into its market share of products with easy online purchasing and delivery, and original marketing. P&G is growing its online presence and has fought back with price cuts, but its stock price has lagged competitors and the S&P 500 in the past year, and – as Peltz points out – over the past decade.
Revenue in P&G's fiscal third quarter declined. Company lifer David Taylor, who became CEO two years ago, drummed up some new costs to cut, but analysts appear underwhelmed by P&G's focus on “irresistibly superior” products. Trian said it is concerned that $13 billion of identified cost savings will not materialize given an "overly complex organizational structure and a slow moving and insular culture."
While those may sound like fighting words, Peltz’s push comes with a smiley emoticon. Trian is not seeking a breakup, or to push out Taylor, or even cut research and marketing expenses. Peltz's first move as director would be to reinstate the board member he displaces. It's a notable contrast with Trian's approach at DuPont, where it sought four board seats and urged for a separation of businesses. Trian got no seats, but the CEO was out five months later and Dupont announced a merger with Dow Chemical that will lead to a breakup.
P&G’s board may still be smarting from its last nick with activism. In 2013, hedge-fund boss Bill Ackman persuaded P&G to remove its CEO and bring back former boss A.G. Lafley. He then sold his shares. Yet the company’s share price has increased less than 10 percent over the past four years – the stock market equivalent of five o'clock shadow. Peltz may not have all the answers to P&G's troubles, but a fresh look on the board is warranted.
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