USA: Trian’s P&G stake raises investor hopes of break-up, cost cuts
Procter & Gamble Co (PG.N), maker of Tide detergent and Gillette razors, will face ever greater pressure to slice costs and slow-growing divisions now that activist investor Trian Partners is a major shareholder.
P&G’s shares hit a two-year high on Wednesday after Trian disclosed a stake in the consumer products company, which is already trying to slim down by selling unprofitable brands. A person familiar with the matter told Reuters that Trian currently holds more than $3 billion of P&G’s stock.
Trian has a track record of pressuring large consumer companies to break up, a history investors and analysts are seizing on with the fund’s newest investment.
But Trian has yet to publish a white paper, and the firm’s exact plan remains to be seen. In addition to breaking P&G into separate companies, analysts speculated that Trian could press for more brand divestitures and heavy-handed cost overhauls.
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“Absent a two- or three-way breakup, we suppose Peltz could also call for a 3G-like attack on the company’s cost structure,” said Don Bilson, director of research at Gordon Haskett, which tracks M&A and activism.
Bilson was referring to 3G Capital, a private equity firm that embraces a hard-core cost cutting strategy known as zero-based budgeting.
Cincinnati-based P&G is a $225 billion behemoth, selling brands such as Crest toothpaste to consumers across the globe.
Bernstein Research said in January 2016 it conducted a survey of P&G’s institutional investors and found that two-thirds favored a break-up.
A break-up could result in the beauty, grooming and healthcare division becoming one company, with P&G separating out everything else, such as its laundry and diaper units, Bernstein said in the report.
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