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Stock Strategist

Another Act in the P&G-Peltz Drama

We think the wide-moat company is still a bit undervalued.


Even though  Procter & Gamble (PG) claimed victory last month following a three-month proxy battle, activist investor Nelson Peltz--who owns about 1% of P&G’s shares outstanding, or $3.5 billion worth--now says a recount by an independent election firm shows that he edged out current board member (and former president of Mexico) Ernesto Zedillo to win a seat at the table. In response, P&G acknowledged that the preliminary recheck puts Peltz ahead, but only by 42,000 votes, or 0.0016% of shares outstanding. This is in contrast to P&G’s contention last month that its slate of directors had won by more than 6 million votes. The company so far has not accepted defeat.

Peltz has suggested that P&G’s organizational structure, corporate governance, and recent financial performance have lagged those of peers and that more must be done to accelerate the pace of change at the leading household and personal-care company. However, we think P&G has been pursuing a course over the past several years to right its ship, culling unprofitable brands and extracting excess costs. While these efforts have yet to materialize as sustainable improvement, we view the company’s efforts as sound and don’t believe that merely adding Peltz to the board will bring forward a meaningful uptick in performance.

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Erin Lash does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.