For Nelson Peltz: The End Does Not Justify the Means

Nelson Peltz with Trian Fund Management is moving full steam at getting a position on the board of Proctor and Gamble, headquartered in Cincinnati, OH (where I live).  Meanwhile, according to the Cincinnati Business Courier, P&G is looking to spend up to $35M to fight Mr. Peltz.  Trian is spending up to $25M to play offense with P&G shareholders.

Peltz argues that P&G has lost its innovative edge, not having had a unique new product developed since the Swiffer in 1999.  P&G says that it has been innovative with new features of existing products, such as the Tide pods. 

I believe Mr. Peltz may have a legitimate argument.  P&G’s biggest splash in the last twenty years was when it acquired Gillette in 2005.  It has a history of coming out with both new products and changes to existing products.  This tradition may have, for various reasons, been lost along the way.

Nevertheless, I think this is the wrong way to bring about the desired changes.  Trian owns over $3B in P&G stock.  An individual or group should buy shares in a company because you like what the company is doing, not to fight them.  If you do not like what P&G is doing, invest somewhere else.  If P&G is doing a bad job, the loss of customers, markets, profits—and stock price—would be a better indicator that changes are needed than just having someone come in from the outside and stir things up.  In addition, Peltz wants to restructure the entire company into a holding company with separate, independent subsidiaries. 

IMO, this is nothing much more than manipulation, and P&G is having to spend time—and money—to play this game.  Money on both sides could be better spent on fighting the competition instead of manufactured internal squabbles.






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