Billionaire investor Nelson Peltz disclosed Monday that he was seeking a board seat at Procter & Gamble, setting up one of the biggest showdowns between an activist shareholder and a corporate titan.
It is yet another sign of the growing power of top activist investors, who have successfully challenged ever-bigger companies into changing their corporate strategies, profiting along the way.
In a regulatory filing, Peltz’s investment firm, Trian Fund Management, argued that the consumer products giant had underperformed financially and was in need of a shake-up. Trian contended that Procter & Gamble needed to cut costs and trim its bureaucracy. Trian disclosed in February that it had taken a $3.5 billion stake in the company.
Activist investors have become forces to be reckoned with on Wall Street in the past decade, taking on bigger targets and often getting results. Their success in shaking up companies has drawn the support of other shareholders. Even staid mutual funds that once kept their distance now give activists ideas about which companies to take on.
The past 12 months alone have seen Daniel S. Loeb’s hedge fund, Third Point, push for changes at Nestlé, and Paul E. Singer’s firm, Elliott Management, take on Samsung and the mining giant BHP Billiton.
The consumer goods giant, whose products include Crest toothpaste and Gillette razors, has struggled in recent years to win over Wall Street analysts worried by increased competition and declining market share, particularly in the United States. The company has sought to markedly slim down, announcing in 2014 that it would cut around 100 brands.
Over the past five years, Procter & Gamble’s stock price has lagged behind the Standard & Poor’s 500 index, which rose 81.5 percent compared with the company’s increase of almost 34 percent. Sales at the consumer-products conglomerate have declined during the past four years, and the company has cycled through three chief executives in eight years.
Shares in Procter & Gamble were little changed Monday, closing at $87.55, up .52 perent. The company carried a market valuation of nearly $224 billion.
Since taking a stake in Procter & Gamble in February, Trian had held about a half-dozen meetings with the company, outlining its arguments, according to two people briefed on the matter. The company made its own counterarguments, including asking for more time to prove the worth of its current strategy.
Those discussions reached a head last week, when Procter & Gamble formally declined to give Peltz a seat.
In an e-mail statement Monday, the Cincinnati-based company said that it had held “an active and constructive dialogue” with Trian. It also said that its board was “confident that the changes being made are producing results, and expresses complete support for the company’s strategy, plans, and management.”
Trian said Monday that it was not seeking to break up Procter & Gamble, a well-worn tactic of activists. Nor was it seeking to replace David S. Taylor, who has been the company’s chief executive for less than two years. If Peltz is elected, Trian said, the firm would renominate the director who had been defeated, effectively expanding Procter & Gamble’s board by one seat.
“As a member of the board, Mr. Peltz would seek to help the company increase sales and profits, regain lost market share, and address the company’s structure and culture, and we believe that he can contribute far more value operating from within the company’s boardroom than by merely advising the company from the outside,” the investment firm wrote in its proxy materials.
Although Procter & Gamble has introduced several initiatives aimed at bolstering its stock price, Trian has argued that they do not go far enough.
What Procter & Gamble needed, Trian asserted Monday, was fresh blood on its board.
“It is Trian’s strong view that the addition of a motivated independent director that has a material ownership stake and relevant industry experience can be a valuable resource for overcoming the root causes of these challenges,” the firm said in its statement.