Best of the Week
Most Popular
1.North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - Nadeem_Walayat
2.Researchers Find $10 Billion Hidden Treasure In A Dead Volcano - OilPrice_Com
3.Gold and Silver : The Battle for Control - Rambus_Chartology
4.Asda Sales Collapse and Profits Crash! UK Retailer Sector Crisis 2017 - Nadeem_Walayat
5.Deep State Conspiracy or Chaos - James_Quinn
6.The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - Plunger
7.Gold Stocks Coiled Spring - Zeal_LLC
8.Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - John_Mauldin
9.Crude Oil Price Precious Metals Link in August - Nadia_Simmons
10.Gold and Silver Precious Metals Nearing Breakout - Jordan_Roy_Byrne
Last 7 days
Donald Trump Terrorist in Chief, “We Aren’t Nation-Building Again, We Are Killing Terrorists” - 23rd Aug 17
How Planned Fed Rate Increases Impact The National Debt & Deficits - 23rd Aug 17
The 3 Assets to Add to Your Stocks Portfolio in This Rate Tightening Cycle - 23rd Aug 17
Half Price UK Theme Parks Entry 2017 With Cheap Chocolate Packs - 23rd Aug 17
[GIFT] Market Control System! - 23rd Aug 17
4 Reasons European Stocks Will Make a Big Comeback This Year - 22nd Aug 17
3 Lesser-Known Charts Revealing a Massive Stock Market Disconnect - 22nd Aug 17
U.S. Treasury Secretary: "I Assume Fort Knox Gold Is Still There" - 22nd Aug 17
Is the Stock Market Setting itself up for a Spectacular Crash? - 22nd Aug 17
Power Elites Launches Civil War Against Trump - 22nd Aug 17
The Stock Market No Longer Cares About Trump - 21st Aug 17
The Coming Boom Of Productivity Will Get Our Economy Back On Track - 21st Aug 17
Buffett Sees Stock Market Crash Coming? His Cash Speaks Louder Than Words - 21st Aug 17
This Could Be The Biggest Gold Discovery In History - 21st Aug 17
Stock Market Correction in Full Swing - 21st Aug 17
Seeking Confirmations – US Stock Market - 21st Aug 17
The changing demographic of online gamblers - 21st Aug 17
Gold is a coiled spring… the breakout is here, fundamentals are in place, technicals are compelling - 20th Aug 17
A Midsummer Night's Dream: Buy Gold and Silver - 20th Aug 17
Gold Mining Stocks 2017 Fundamentals - 20th Aug 17
EIA Weekly Report and Crude Oil - 19th Aug 17
4 Insights for Adjusting Your Portfolio in a Rate-hike Environment - 19th Aug 17
Gold Direction Indicator - 19th Aug 17
Historical Inevitability and Gold and Silver Ownership - 19th Aug 17
You Are Being Lied To About “Low” Gold Demand - 19th Aug 17
This is Why Cocoa's Crash Was a Perfect Setup - 19th Aug 17
Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High - 19th Aug 17
North Korea Is Far From Being Irrational… It Has A Plan - 18th Aug 17
US Civil War - FUNCTIONAL ILLITERATES TRYING TO ERASE HISTORY - 18th Aug 17
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Activist Investors Are Taking Over Wall Street, Procter and Gamble Might Never Remain the Same

Companies / Corporate News Jul 24, 2017 - 02:12 PM GMT

By: Boris_Dzhingarov

Companies In February, billionaire investor Nelson Peltz revealed that he had purchased a $3.5 billion stake in Procter & Gamble Co (NYSE:PG) through his investment firm, Trian Partners.  Wall Street suspected that the purchase was part of a grand strategy even though Mr. Peltz didn’t offer any proposals on making changes in the company. Market analysts surmised that the billionaire investor was bidding his time – now it seems that Peltz indeed had plans to make some changes at Procter & Gamble after all.


Here are the salient points of the proxy fight with PG

On Monday July 17, Peltz through his firm set the stage for what might end up being a massive proxy showdown after he had asked for a seat on the board of Procter and Gamble. The consumer goods giant officially declined to give him a seat on the board. Mr. Peltz in a regulatory filing observed that Procter and Gamble needs to shake up its organization and operations in order to maximize shareholder value.

Part of the proxy material submits that “Mr. Peltz would seek to help the company increase sales and profits, regain lost market share, and address the company’s structure and culture, and we believe that he can contribute far more value operating from within the company’s boardroom than by merely advising the company from the outside,” 

In the defense of Trian Fund Management, Procter and Gamble has actually underperformed the market even though it still manages to post decent gains. The chart below shows how Procter and Gamble has fared in the last five years in comparison to how the general market represented by the S&P 500 has fared. From the chart, you'll observe that the S&P 500 has booked gains of 81.84%in the last five years. In contrast, Procter and Gamble has only managed to score 35.01% gains.

However, the management of Procter and Gamble submits that it is already doing a great job in maximizing shareholder value. To be fair, the firm had embarked on a massive cost-cutting initiative in 2014 to divest about 100 brands and merge operations across other brands. Procter and Gamble notes that it has already cut about $10B in costs since 2012 and it has mapped out strategy to trim expenses by another $13 billion going forward.

The firm further notes that its current cost-cutting initiatives are will ultimately help shareholders to realize bigger returns. In a statement, Procter and Gamble maintained that its board was “confident that the changes being made are producing results, and expresses complete support for the company’s strategy, plans, and management.”

Procter and Gamble might never remain the same

Josh Wasserman, in a Stern Options market commentary notes that "activist investors have become the shakers and movers of Wall Street – we have seen them successfully forced corporate giants to review their operations and strategies." In the last one year, Jana Partners took on Whole Foods Market, forcing the retailer to sell itself to Amazon after revamping the board. Yahoo spun off its core business after a serious proxy fight with Starboard value. Third Point engaged Nestle in a massive fight and we can still remember how Carl Icahn stalled the leveraged buyout of Dell.

In some cases, activist investors get their ways – the company puts them on the board or changes its corporate strategy. In other instances, the company is able to thwart the efforts of the activist investors. However, other shareholders on Wall Street mostly tend to take the side of activist investors; hence, Procter and Gamble will need to present a superior argument that it is doing enough to maximize shareholder value. Without a superior argument from the management, Procter & Gamble will never remain the same irrespective of whether Mr. Peltz gets a seat on the board or not.

By Boris Dzhingarov

© 2017 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife