Peltz Goes on Offense In Break From Form -- WSJ
July 18 2017 - 3:02AM
Dow Jones News
By David Benoit
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 18, 2017).
Trian Fund Management LP doesn't wage proxy fights often, but
when it does, it goes big.
The activist investor launched a campaign Monday to get
co-founder Nelson Peltz elected to the board of Procter &
Gamble Co. Worth $222 billion, P&G is the largest company to
ever face such a campaign.
Because of P&G's size, Trian's ability to win support from
other investors will be in a particularly bright spotlight, and it
will have to convince them that its brand of activism can help
companies and not distract from work already being done. P&G
rejected naming Mr. Peltz to the board and said in a statement it
"is confident that the changes being made are producing
results."
Typically, Trian has tried to avoid the perception it fights
companies. It has branded itself as a "highly engaged shareholder,"
not an activist, but instead a sort of uber-adviser to executives
and boards. It seeks a board seat at nearly all of its companies so
that it can tap the "perfect information" only insiders have and
can change the discussion about what is working and what isn't.
Trian's performance lately has lagged behind broader markets. A
major Trian fund is up 1.5% through the first week in July,
according to an investor document, dragged down by a 15% slump in
General Electric Co. this year, and a recent drop in food
distributor Sysco Corp. after Amazon.com Inc. announced its plan to
buy Whole Foods Market Inc. The S&P 500 index, meanwhile, rose
9.3% through June and an index of activist funds tracked by HFR
Inc. rose 4.2% in the same time frame.
Trian says its presence helps companies grow their earnings and
stock price more than average. Of the boards Mr. Peltz has joined,
the companies have averaged annual returns that best the S&P
500 by 8.8 percentage points, Trian said in a presentation.
Trian's willingness to work with companies in private has often
led it to negotiate its way into the board instead of needing a
fight. Since it started in 2005, it has only had two prior proxy
fights -- with H.J. Heinz Co. and DuPont Co. -- and there were
nearly 10 years between them.
In 2006, it took a stake in Heinz and sought a seat on the
ketchup giant's board. That led to a heated fight, an early example
of a shareholder taking on an American icon that helped open the
floodgates of activism. Trian won two seats on that board,
including one for Mr. Peltz. Afterward, the sides grew close and
Heinz CEO William Johnson was put on the board of PepsiCo Inc. by
Trian.
The victory worked as something of a stamp of legitimacy for
nearly a decade: Trian would go on to take big stakes, and
companies, including Bank of New York Mellon Corp. and
Ingersoll-Rand PLC, would often quickly assent to giving the firm a
board seat.
At Bank of New York Mellon, Trian co-founder Ed Garden joined
the board in 2014, one of the few activists to join a heavily
regulated bank. The sides have publicly lauded each other and
worked together to cut costs, and the stock has returned 38% since
Mr. Garden joined the board, in line with the KBW Bank Index.
Monday, the bank named a new chief executive, Charles Scharf.
In 2015, Trian ran a fight against DuPont. At the time, a win by
Trian would have made DuPont the largest company ever to lose a
shareholder vote, but it waged a successful countercampaign. DuPont
argued Trian would be "shadow management" in the boardroom and said
it didn't need Trian because its board had proven it was willing to
make changes on its own.
Though Trian lost that fight, the vote was close enough that if
any single large investor had flipped it would have won a seat. And
within months, DuPont missed on its quarterly results, changed its
CEO and opened back up to Trian helping it structure its pending
merger with Dow Chemical Co.
P&G seems ready to make a similar case to DuPont's: CEO
David Taylor only started in November 2015 and has been moving to
turn the gigantic organization. The board backs his plan and
doesn't want to add Mr. Peltz because it doesn't see the need,
people familiar with the matter said. The board also rejected
Trian's concerns Mr. Taylor wouldn't deliver on pledged cost cuts,
arguing the fear was based on prior management.
Rob Copeland contributed to this article.
Write to David Benoit at david.benoit@wsj.com
Corrections & Amplifications Procter & Gamble's name was
misspelled as Proctor & Gamble in a graphic that appeared with
an earlier version of this article. (July 17, 2017)
(END) Dow Jones Newswires
July 18, 2017 02:47 ET (06:47 GMT)
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