Activist investor Trian Fund Management LP takes a $3.5 billion stake at P&G

While this marks the largest ever investment by an activist investor in Proctor & Gamble, it is interesting to note that the company has made significant strides in boosting its revenues in the last quarter especially in the healthcare and beauty business brands.

In a development which is aimed at boosting Trian Fund Management LP’s sales and improving the mix of brands in its basket, the company has disclosed that it has taken a $3.5 billion stake in Procter & Gamble Co on Tuesday.

This development is significant since it is the largest ever position taken by the activist investor in a company and comes at a time when P&G is struggling to boost it’s the price of its stock to levels at which they were seen two years ago.

In 2016, Trian sold 41 brands, including Gillette razors and Tide detergent, in its basket to Coty Inc for $12.5 billion, in a move that has been described by the media as focusing on core products.

It will not be surprising if Trian pushes P&G to shrink even further especially since the Cincinnati based company is an industry behemoth.

“(Trian)could argue that the brand sales … did not go far enough to create a faster growing company,” said Caroline Levy, an analyst at CLSA.

She went on to note that separating P&G’s beauty business could make business sense since it could perform better as a standalone company.

“Continued share losses in many categories, especially skin care, point to a need for faster change.”

Damon Jones, P&G’s spokesman reacted to the news of Trian’s investment in the company by saying, P&G got to know of Trian’s involvement thanks to its filing.

“P&G welcomes investment in our company. We will continue to do what we always do,” said Jones.

Trian’s stake at P&G makes it the second activist investor which has targeted the company: in 2012 Pershing Square Capital Management had taken a position in the company and had called for the ouster of Robert McDonald, its CEO. When McDonald was replaced in May 2014, Pershing exited its position.

Incidentally, P&G’s deadline for nominations to its board of directors ends on June 13. If Trian were to pursue a board representation, the two sides have around four months to thrash out an agreement.

As yet it is unclear as to what Trian’s intentions are.

P&G’s annual meeting is held in October.

Last month, P&G has reported better-than-expected quarterly sales, with its health care unit peaking in business performance. However, P&G has warned that overall sales growth is likely to dip by 2% to 3% percentage points in 2017.

It’s worth noting that the beauty and the health care businesses, which includes brands such as Olay and Head & Shoulders, together account for nearly 30% of P&G’s total sales.


Categories: Creativity, Entrepreneurship, HR & Organization, Strategy

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