P&G proxy fight's outcome: chief critic Nelson Peltz joining board
Alexander CoolidgeProcter & Gamble said Friday it has agreed to add hedge fund investor Nelson Peltz to its board of directors in March.
An updated count showed Peltz fell short of winning a board seat in a long, bitter battle that ended in near-tie vote by shareholders in October. Nonetheless, the company decided to offer Peltz a seat, effectively conceding the largest proxy fight ever.
After months of wrangling over the consumer giant's future, the net result is that the company's most prominent critic gets a seat at the table.
"The shareholders have spoken – it's time to move forward," P&G CEO David Taylor told The Enquirer on Friday.
For his part, Peltz avoided declaring victory. He said he and Taylor have developed a "strong relationship."
“I believe in the tremendous potential of P&G," Peltz said in a statement. "I look forward to bringing fresh perspectives to the boardroom, and working collaboratively with David and the rest of the board to drive sustainable long-term shareholder value at P&G."
Bernstein analyst Ali Dibadj said P&G blinked.
"Quick Take: P&G - Peltz wins...," Dibadj wrote in a note to investor on Friday. He noted Peltz's reassurances to P&G about focusing on growth and not cost-cutting were promises he'd already made publicly. "We look forward to the company delivering more on its potential."
P&G's stock price surged nearly a dollar in after-hours trading immediately following the Peltz announcement. It had closed Friday at $91.89.
The company said it will also add Joseph Jimenez, the CEO of Swiss pharmaceutical giant Novartis, to the board of directors in March. Jimenez's experience in health, consumer goods and international sales were factors in adding him to the panel.
Adding Peltz and Jimenez will expand P&G's board from 11 to 13 members.
On Friday, Taylor said talks between Peltz and the company had focused on how to grow the company and not on cutting jobs or consolidating business units.
P&G officials said Peltz has reaffirmed he doesn't want the company to ramp up its debt, substantially reduce research and development spending, break up the company or see it exit Cincinnati.
"The discussions we've had are talking about what we want to do to grow the company and create value for shareholders," Taylor said. "It's been a challenging process, but there's common ground and we can move forward together."
Taylor declined to say what the company would have done if Peltz and his firm, Trian Fund Management, had lost by a larger margin.
"I can't speculate on different scenarios," Taylor said. "We'll respect the will of shareholders and move forward."
Taylor said the results were so close, it was obvious enough shareholders supported Peltz joining the board. Peltz and he have held numerous "productive conversations" in recent weeks and that he was convinced the company could work with the investor, he said.
While Peltz and Taylor talk teamwork, it doesn't guarantee P&G will prosper or the partnership will remain cordial.
Former General Electric CEO Jeffery Immelt courted Peltz's investment for years before the investor bought 70 million GE shares. After more than a year of disappointing results, Immelt abruptly retired.
Last month, GE's new CEO John Flannery announced in November the company would slash its dividend and shed multiple divisions, rebuilding its business around GE Aviation as well as its power and health care operations.
New results from the proxy vote count disclosed Friday showed Peltz fell more than 498,000 votes short of winning the contested board seat election – meaning P&G had squeaked out a victory by a modest 1/40th of 1 percent.
But the result could easily have led to a weeks- or months-long "challenge" phase of the proxy tabulation, if contested. An expensive process, also called a "snake pit," it would have clouded P&G's future and required legions of attorneys. There could also have been lawsuits beyond that.
Even if P&G had successfully blocked Peltz from the board, the activist investor could have launched a new proxy contest next year. He also could have nominated a slate of board members, not just himself.
An updated proxy count in November showed Peltz ahead by less than 43,000 out of nearly 2 billion shares voted – less than 1/600th of 1 percent, according to P&G. In a preliminary October result, Peltz fell 6.2 million votes short of winning, losing by 0.3 percent of votes cast.
How did P&G get the initial proxy vote wrong?
During his campaign, Peltz slammed P&G's "stifling bureaucracy" and advocated consolidating the company's business units from five to three.
Is P&G's slow and steady improvement enough?
The activist investor asked P&G shareholders to elect him to advocate for a faster company turnaround. Peltz harshly criticized the company's sluggish results and corporate structure during the campaign.
Nelson Peltz lost P&G seat by less than 1 percent, may demand P&G recount
P&G reversal: Figures show Nelson Peltz leads in proxy recount
During the contest, P&G said Peltz was late to the company's turnaround efforts and said a successful restructuring is underway.
P&G's stock had slid below $90 a share after the initial vote results in October indicated Peltz fell short and the company reported modestly improving results for its first quarter.
The maker of Tide detergent and Pampers diapers employs 10,000 workers in Greater Cincinnati and 95,000 worldwide.
P&G investor Nelson Peltz's deals have cost 100K jobs at other companies
P&G accused Peltz during the proxy battle of acting "entitled" to a board seat that the company claimed he wasn't qualified for. The company said the investor's views were based on "outdated" information and complained his involvement would be an unwelcome distraction.
Taylor, who is chairman of the board, said Peltz had a history of bringing a "shadow management" team to companies he invested in to push for changes he wanted.