Value Investing

P&G Spending $100 Million To Fend Off Nelson Peltz

On Monday, Trian’s Nelson Peltz sent a letter to investors saying Proctor & Gamble will spend over $100 million to keep him out of the boardroom. “The company is spending a huge amount of money on an army of lawyers, bankers and other advisors,” Peltz said. “All of P&G’s costs related to this proxy fight are coming out of P&G shareholders’ pockets. Just think what that $100+ million could do if put to work to regain lost market share.” In contrast, Peltz said Trian has committed to pay for its campaign at a zero cost to shareholders.

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Contrary to Peltz’s estimations, Chairman and CEO David Taylor said P&G is only spending approximately $35 million toward the proxy fight, adding that Peltz’s assessment is “preposterous.” P&G also said it is unfair to focus on the company’s costs considering Trian initiated the contest. Trian is expected to spend $25 million, making the combined $60 million cost a record amount for a board fight. The company’s large market capitalization and enormous retail shareholder base can explain the large price tag.

What we’ll be watching for this week

  • Will Florintree Advisors, a Mumbai-based investment firm which launched an activist fund earlier this year, succeed in electing its chairman Mathew Cyriac, the former co-head of Blackstone India, to the board of PTC India at the annual meeting on Monday?
  • Will Pershing Square Capital Management succeed in convincing Automatic Data Processing to use the universal proxy ballot system to vote on the proxy contest waged by the hedge fund?
  • How will automotive seating company Adient react to Blue Harbour Group’s pressure to improve margins at its European metals and mechanisms business and to increase share repurchases?

Short update

Gotham City Research has revealed it has a short position in online marketing company Criteo. The short seller accused the French company of lack of transparency and of charging advertisers for click on ads that either never occurred or it never contributed to. In a Friday report, the activist said it believes over half of the company’s revenue comes from “suspect” sources like clickbots or low-quality websites. Gotham predicted Criteo’s sales and profits would decline "as a result of increased client scrutiny, leading to a 67%-77% decline in its share price."

Gotham’s short campaign follows The Friendly Bear’s November 2016 short position in Criteo. The Friendly Bear also accused the advertising technology company of fraudulent sources when compiling its clicks on advertising. Following the release of Gotham’s short report, Criteo’s shares were down 6% at midday on Friday, reaching a low of $39.67.

Article by Activist Insight