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Procter & Gamble : Proxy Fights Are a Rarity for Peltz's Trian

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07/17/2017 | 08:32pm CEST
By David Benoit 

Trian Fund Management LP doesn't wage proxy fights often, but when it does, it goes big.

The activist investor launched a campaign Monday to get co-founder Nelson Peltz elected to the board of Procter & Gamble Co. Worth $222 billion, P&G is the largest company to ever face such a campaign.

Because of P&G's size, Trian's ability to win support from other investors will be in a particularly bright spotlight, and it will have to convince them that its brand of activism can help companies and not distract from work already being done. P&G rejected naming Mr. Peltz to the board and said in a statement it "is confident that the changes being made are producing results."

Typically, Trian has tried to avoid the perception it fights companies. It has branded itself as a "highly engaged shareholder," not an activist, but instead a sort of uber-adviser to executives and boards. It seeks a board seat at nearly all of its companies so that it can tap the "perfect information" only insiders have and can change the discussion about what is working and what isn't.

Trian's willingness to work with companies in private has often led it to negotiate its way into the board instead of needing a fight. Since it started in 2005, it has only had two prior proxy fights -- with H.J. Heinz Co. and DuPont Co. -- and there were nearly 10 years between them.

In 2006, it took a stake in Heinz and sought a seat on the ketchup giant's board. That led to a heated fight, an early example of a shareholder taking on an American icon that helped open the floodgates of activism. Trian won two seats on that board, including one for Mr. Peltz. Afterward, the sides grew close and Heinz CEO William Johnson was put on the board of PepsiCo Inc. by Trian.

The victory worked as something of a stamp of legitimacy for nearly a decade: Trian would go on to take big stakes, and companies, including Bank of New York Mellon Corp. and Ingersoll-Rand PLC, would often quickly assent to giving the firm a board seat.

At Bank of New York Mellon, Trian co-founder Ed Garden joined the board in 2014, one of the few activists to join a heavily regulated bank. The sides have publicly lauded each other and worked together to cut costs, and the stock has returned 38% since Mr. Garden joined the board, in line with the KBW Bank Index. Monday, the bank named a new chief executive, Charles Scharf.

In 2015, Trian ran a fight against DuPont. At the time, a win by Trian would have made DuPont the largest company ever to lose a shareholder vote, but it waged a successful countercampaign. DuPont argued Trian would be "shadow management" in the boardroom and said it didn't need Trian because its board had proven it was willing to make changes on its own.

Though Trian lost that fight, the vote was close enough that if any single large investor had flipped it would have won a seat. And within months, DuPont missed on its quarterly results, changed its CEO and opened back up to Trian helping it structure its pending merger with Dow Chemical Co.

P&G seems ready to make a similar case to DuPont's: CEO David Taylor only started in November 2015 and has been moving to turn the gigantic organization. The board backs his plan and doesn't want to add Mr. Peltz because it doesn't see the need, people familiar with the matter said. The board also rejected Trian's concerns Mr. Taylor wouldn't deliver on pledged cost cuts, arguing the fear was based on prior management.

Write to David Benoit at [email protected]

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