PG Procter and Gamble Co

By David Benoit 

Trian Fund Management LP has built a large position in Procter & Gamble Co., the second shareholder activist in recent years to set its sights on the consumer-products giant.

Trian is expected to disclose that it owns a stake in the Cincinnati maker of Tide detergent, Gillette razors and Pampers diapers as early as Tuesday, according to people familiar with the matter. The exact size of the investment couldn't be learned.

It's not clear what Trian is planning for the investment, but historically the firm has focused on companies it believes need tighter focus on core operations, as well as on cutting costs and management bureaucracy. As with other activists, it's also known for advocating for asset sales or breakups. Trian sometimes works quietly from inside the boardroom and at other times wages public battles for influence.

P&G had a market value of about $225 billion as of Tuesday's close, making it one of the biggest companies to face an activist, but Trian has had success at major companies before, including DuPont Co.

This is not the first time P&G has faced an activist. In 2012, William Ackman's Pershing Square Capital Management LP invested in the company and called for a CEO change amid slumping profits. A year later, Robert McDonald was replaced by his old boss, A.G. Lafley, who remained chief executive until last year. Company veteran David Taylor is now chairman and CEO.

The activist world has been in guessing mode on the new Trian position, particularly since co-founder Nelson Peltz said in December that he and his partners had started buying a new stock. At that time, Mr. Peltz told CNBC that he hoped to talk to the board and management before the investment became public, as the firm has tried to distance itself from bare-knuckled activism and position itself as constructive, if opinionated, shareholders.

P&G has for years been slashing costs and seeking ways to boost its sales growth as some consumers gravitate toward smaller, and nimbler, rivals. The closely watched organic sales-growth figure has been stuck between 1% and 3% in recent years, though the company in January increased its target for the year ending in June to between 2% and 3%.

That increased forecast, along with better-than-expected sales in its fiscal second quarter, had boosted the stock and management said it was on the right track.

P&G shares have gained 5.7% this year including dividends, outpacing the S&P 500's 4.2% return, but they trail the benchmark over the past one-year and three-year periods.

Analysts say the environment is tough for consumer-staples sellers, also because of macroeconomic factors like currency volatility. Several big research firms have downgraded P&G shares, including Goldman Sachs Group Inc., which put a sell rating on them in January.

Trian didn't make a new investment in all of 2016, focusing instead on its portfolio companies, after making three new investments in 2015. One of them was then its biggest ever, a $2.2 billion stake in General Electric Co.

But it was also ramping up for this new bet by fundraising and selling some other stakes.

In the year it sold a $1.8 billion investment in PepsiCo Inc., after a three-year campaign that included a bid to break up the soda and snack maker, and a $383 million position in money-manager Legg Mason Inc., which marked one of the few times in which Trian has helped remove a chief executive.

Trian raised a specific fund for the P&G position in recent months, tapping large investment pools like sovereign-wealth funds and pension funds, people familiar with the matter have said.

Trian is expected to partially disclose the P&G stake Tuesday when it releases its portfolio as of the end of December. The investment fund has continued buying throughout the new year, the people said.

Write to David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

February 14, 2017 16:57 ET (21:57 GMT)

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