Can Procter & Gamble Co (NYSE:PG) Be Revamped By Nelson Peltz?

September 21, 2017, 12:24 pm ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

In a recent interview on CNBC, Nelson Peltz, an activist investor and founding partner of Trian Fund Management L.P., stated that Procter & Gamble Co (NYSE:PG) should be split into three segments.

Nelson Peltz has engaged P&G in a proxy battle as he angles for a seat on the company’s board in order to implement his transformation plan for the major consumer company, which has been underperforming its peers in the recent past.

Many analysts believe that P&G is unlikely to win the proxy war and it would be advisable for the company to give Peltz the seat even before the October 10 board vote. Peltz has released a 96-page presentation that seeks to transform the way P&G operates as well as its reporting procedures, which are currently flawed, in order to boost the company’s profitability.

On the contrary, P&G CEO, David Taylor believes that the company’s current strategy is working given its recent performance in the e-commerce segment. P&G grew its e-commerce revenues by 30% in the past fiscal year and expanded its market share in eight out of ten e-commerce categories.

Yacktman Asset Management, which owns about $1.3 billion of P&G stock has recently supported Peltz’s bid for a board seat. It is highly likely that Peltz will win the proxy battle by getting a seat on the board in order to influence the company’s strategic direction in future.

Trian intends to reduce the number of business segments at P&G from the current five to just three segments, which are home care, beauty/healthcare, and a feminine/baby care company. According to Trian, P&G’s beauty segment or its Gillette business should be spun off from the parent company in order to unlock the value in the two segments.

The proposed three divisions would operate as standalone companies under the P&G umbrella. P&G currently faces stiff competition from companies such as Unilever NV (ADR) (NYSE:UN) and Revlon Inc (NYSE:REV).

It remains to be seen whether Peltz shall win the proxy war come October 10. However, the question on investors’ minds is whether P&G is a good long-term investment at its current valuation.

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