After P&G proxy battle concludes, what’s next for iconic Cincinnati business?
CINCINNATI (WKRC) - The tide has not turned at Procter and Gamble. At least not enough to elect an activist hedge fund investor to the company's board of directors.
P&G on Tuesday said the votes are in and Nelson Peltz is not going to get a seat in the board room.
So now what? What's next for the consumer products giant?
It was the most expensive proxy fight in history. The two sides in the battle were P&G itself and hedge fund investor Nelson Peltz. Spending something like $100 million combined in a fight for the very soul of a Cincinnati corporate icon.
While P&G declared victory, saying Peltz did not win a seat on the company's board, Peltz predicted the margin would be no more than one percent and might challenge the final count.
Peltz wants to split P&G into three operating units, claiming the company's stock is under-performing.
“Doing the best you can, that's okay for your ten-year-old son. But when you have shareholder dollars, $200 billion of it, doing the best you can just ain't gonna cut it,” said Peltz.
P&G argued the company is already making significant changes and will continue to do so, Peltz campaign or not.
“I don't think that it fractured our company. It brought us together, brought the board together. The commitment to do what is right is to deliver good results, great results, and do it the right way was through the organization and the investors pushed the same thing. We want to see P&G back in the top third of our peer group. We're aligned on that and we're working hard to make that happen,” said P&G CEO David Taylor.
But even with the apparent victory, analysts say P&G still faces pressure to make more money and therefore increase stock value.
James Russell, of Cincinnati based Bahl and Gaynor, says the proxy fight is only the first or second inning of a nine inning game.
“What I think people will be watching, investors especially, will be improvement every single quarter, for a period of years. Every quarter we see 2-3-4-5% improvement in a variety of operating metrics, slow and steady wins the race,” said Russell.
Not only was this proxy battle expensive, but it was also different than most others. Most stock in most big companies is owned by institutional investors like Nelson Peltz.
But 40 percent of P&G stock is owned by P&G retirees, employees and small investors, many of whom live in P&G’s hometown and perhaps may have been more favorably inclined towards the company as opposed to an outsider.
P&G stock closed Tuesday at $91.62 a share, down 50 cents, but remember, this is a long-term question. Don't focus on just one day.
Although P&Gis claiming victory in Tuesday's preliminary vote count, it could be several weeks before the final results are out.
Meantime, Nelson Peltz is also putting pressure on another company with a major Cincinnati presence: General Electric.
On Monday, a Peltz colleague from his investment firm was named to the GE board. GE is based in Boston, but has thousands of employees locally.