P&G slams Peltz’s record as activist-director
Consumer goods group turns tables on veteran investor ahead of vote on board seat
Procter & Gamble is turning the tables on Nelson Peltz, the activist investor who wants the consumer goods group to address what he calls “chronic underperformance”.
As it fights to stop Mr Peltz from winning a board seat in a shareholder vote next month, P&G on Tuesday attacked the investor’s own performance record and suggested he added little value by being a director at similar companies.
In a 106-page document filed with the US Securities & Exchange Commission on Tuesday, P&G said that stocks purchased by Mr Peltz’s hedge fund Trian Partners had underperformed the market by 5 per cent in the year up to its investment and then saw modest outperformance during Trian’s investment period, followed by modest underperformance after it exited.
The filing escalates and personalises a fight that is shaping up to be one of the most contentious of this year’s showdowns between a US company and an activist. The P&G analysis was based on Trian investments worth more than $25m that were held for longer than two years.
In the filing, P&G laid out its case as to why Mr Peltz should not be granted a board seat, saying he “has not produced any new ideas that make sense for P&G” and has “an outdated and misinformed view” of the company. Where Mr Peltz has offered specific criticisms of P&G, “they are demonstrably wrong”, the company said.
It also did a deeper dive into the results at Wendy’s, Heinz and Mondelez — three of the companies where Mr Peltz has had a board seat — and found that the operational results when he was there “often varied” from what Trian had initially proposed.
In response to the filing, a Trian spokesperson said that P&G was “distorting the facts to denigrate Nelson Peltz’s track record”.
“The real issue that P&G shareholders must address in this proxy contest is P&G’s long history of share price underperformance, continuing market share declines and suffocating bureaucracy which obscures accountability,” the company said.
On Monday, Mr Peltz stepped up pressure on P&G with a letter to shareholders urging them to vote him on to the board at the annual meeting on October 10. He alleged “chronic underperformance” and blasted the pay of senior managers at the company, saying the P&G board “not only accepts underperformance but rewards management for it”.
That came on top of a 94-page presentation last week by Trian that criticised the company’s performance and urged it to split its operations into three autonomous units.
Trian bought a $3.5bn stake in P&G — the company behind household brands such as Tide detergent — in February, giving it about 1.5 per cent of the company.
In its latest filing, P&G said it had analysed since November 1, 2015, the total shareholder return of its company versus four companies where Mr Peltz sits on the board — Mondelez, Sysco, Madison Square Garden and Wendy’s — and found that P&G had returned 28 per cent for its shareholders compared to 4 per cent across the Trian’s four companies. A 9 per cent decline at Mondelez, the largest of the four companies, overwhelmed positive returns of between 17 per cent and 70 per cent at the other three.
P&G also said Trian’s claim that it generally holds investments for around three to five years was not true and that the median holding period for all its current and past investments is 2.3 years.
By contrast, P&G’s shareholder register is dominated by index tracker funds likely to hold the stock in perpetuity; the median ownership period of the company’s stock by its top 25 institutional shareholders is already more than 20 years.