Trian Partners Nominates Nelson Peltz for Procter & Gamble Board

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Trian Partners Files Preliminary Proxy Statement for P&G’s 2017 Annual Meeting, July 17, 2017

  • Trian Fund Management (“Trian”) beneficially owns approximately $3.3Bn of shares of The Procter & Gamble Company (“P&G”) – filed a preliminary proxy statement with the SEC for the election of Nelson Peltz, CEO of Trian, to P&G’s Board of Directors at the 2017 Annual Meeting of Shareholders
  • As one of P&G’s largest shareholders and given P&G’s disappointing results over the past decade, Trian has a keen interest in helping P&G address the challenges it is facing
  • Weak total shareholder returns:
    • Over the past decade, P&G has underperformed relative to both its peers and the S&P 500
    • P&G’s total return to shareholders was less than half that of its peers and has been in the bottom quartile over most recent time frames
  • Deteriorating market share:
    • Over the past 5 years, organic sales growth has decelerated and has lost market share across most of its categories
    • Organic sales and volume growth have been well below that of traditional large-cap consumer packaged goods peers
    • Disruptive and existential threats are impacting the entire consumer packaged goods industry, including changes in tech and consumer behavior, and P&G must act with urgency to address the market share it is losing to both its peers and smaller local competitors who are adapting to industry changes more effectively
  • Excessive cost and bureaucracy:
    • Management acknowledges the need to reduce cost and bureaucracy but it is clear to Trian that these critical issues have not been sufficiently addressed
    • Trian’s analysis shows that P&G’s $10 Bn cost-cutting program launched in 2012, has had no discernible impact on profits and sales growth
      • To the extent savings were reinvested to drive growth, there was little impact on organic volume growth and market shares declined
      • Savings did not drive earnings growth given that operating profit was essentially flat from 2012 to 2016
    • Although P&G stated that it has identified $13Bn of additional cost savings, Trian is concerned that this initiative will be as ineffective as the 2012 program in driving sales growth, earnings growth and shareholder value creation
    • P&G has an overly complex organizational structure and a slow moving and insular culture
      • Structural and organizational bureaucracy prevents management from identifying and responding to commercial opportunities in a timely manner, hinders product innovation and dampens sales growth
    • Adding Nelson Peltz to the Board will help P&G address these challenges
      • At consumer companies where Mr. Peltz has served on the Board, EPS growth has outpaced the S&P 500 by an average of 780bps annually
      • Total shareholder returns at consumer companies where Mr. Peltz has served on the Board have outperformed S&P 500 by an average of 880bps annually
    • What Trian is NOT pushing for:
      • NOT advocating for the break-up of the Company
      • NOT suggesting that the CEO be replaced
      • NOT seeking to replace directors
      • NOT advocating taking on excessive leverage
      • NOT seeking to cut pension benefits
      • NOT suggesting that R&D, marketing expense or capex be reduced

“Trian believes the job of a highly engaged shareowner in the boardroom is to foster a true sense of ownership among directors and inspire the board to take decisive and timely action to create sustainable, long-term value for both the company and its shareholders” – Nelson Peltz

“As a member of the Board, it would be my goal to help improve performance by increasing sales and profits and regaining lost market share. I also believe the Board must address the company’s structure and culture. I can add far more value operating within the P&G boardroom than by merely looking in from the outside” – Nelson Peltz

Nelson Peltz’s Background and Experience

  • CEO and Founding Partner of Trian, a highly regarded investment management firm formed in 2005
  • Over the course of his career, served on a number of corporate boards and is currently a director at Mondelez (since January 2014), Sysco (since August 2015), The Madison Square Garden (since December 2014) and the Wendy’s Company where he is non-executive Chairman (since 2007)
  • If elected to the P&G Board, he intends to resign from at least one of his current boards
  • Previously, served as a director of Ingersoll-Rand, Heinz Company, Legg Mason, and National Propane Corporation
  • Native of Brooklyn – began his career in 1963 when he joined his family food business
  • From 1993 to 2007, served as the Chairman and CEO of Triarc Companies – during that period, Triarc owned Arby’s and acquired Snapple Beverage Group as well as other consumer and industrial businesses
  • Was Chairman and CEO of Triangle Industries and parent of American National Can Company until it was acquired by Pechiney
  • Was Chairman and CEO of Avery
  • Attended The Wharton School of the University of Pennsylvania

Trian’s Introductory P&G Presentation: Revitalize P&G – Together, July 17, 2017

Image Source: RTTNews

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