EXCLUSIVE: P&G proxy fight gets personal as activist Peltz sends testy email to CEO Taylor

Peltz: I'm lonely on the 'high road'
Posted at 11:17 AM, Oct 08, 2017
and last updated 2017-10-08 23:21:19-04

CINCINNATI -- Activist investor Nelson Peltz pulled two commercials off Cincinnati TV stations this weekend after Procter & Gamble Co. CEO David Taylor called Peltz to personally complain the ads were false and misleading.

The Friday night call was discussed in an email that Peltz sent to Taylor Saturday and shared with WCPO.

In the email, reprinted below, Peltz told Taylor he stands behind the accuracy of the ads but took them off the air because he wants to “take the high road.” Then, he accused P&G of committing “a multitude of errors and misrepresentations” about his business career that have yet to be corrected or publicly acknowledged.

This crossfire of accusations comes just a few days before Peltz and Taylor could be ordered to work together by P&G shareholders. A proxy contest that began in July will end at P&G’s annual meeting Tuesday. If Peltz wins, he’ll become a 12th P&G board member, pushing for big changes to Cincinnati’s second-largest company.

RELATED: Peltz shares vision for how P&G should operate

P&G downplays the spat between Peltz and Taylor.

“We handled this like we do any normal ad dispute: Resolve it at the source and prevent the spread of misinformation,” said P&G spokesman Damon Jones. “The fact is it simply didn't tell the truth – nothing more, nothing less.”

WCPO General Manager Jeff Brogan said the station was notified around midnight Friday that Peltz’s Trian Fund Management L.P. wanted to pull two ads about the proxy contest that started running last week. The ads featured Peltz in an office, calmly explaining why his $12.7 billion hedge fund invested more than $3 billion in P&G: He wants to help it grow.

Here’s the part that triggered Taylor’s Friday night phone call:

“This was the original widows and orphans stock.  Everybody could depend on earnings going up, and dividends going up and the stock going up.  That hasn’t happened in ten years … We want market share gains, which we haven’t had in a decade. That’s what we want.”

In a series of texts and email exchanges between P&G and WCPO, Jones said the statements were deliberately and demonstrably false. P&G’s detailed rebuttal is also reprinted below. Peltz’s assertion that dividends haven’t increased in 10 years is perhaps the most questionable statement in the ad, as P&G has achieved 61 consecutive years of dividend payment increases.

“In this important election, facts matter,” Jones said. “If one shareholder was misled by false advertising, that’s one too many in our book.”

In his email to Taylor, Peltz defended the ad’s content.

“The fact is over the last ten years P&G has clearly experienced market share loss,” Peltz wrote. “P&G’s stock price, EPS and dividend growth have all underperformed peers dramatically over the last decade. These were the primary messages conveyed in these ads.”

Jones said Trian’s withdrawal of the commercials is proof enough that they weren't accurate. And he criticized Peltz’s release of the email to Taylor.

“The note itself says it is confidential and ‘for the exclusive use of the recipient(s) to whom it is addressed,’ a principle clearly violated by him sending it to you, let alone violating the trust of a person with whom he wants to establish a productive relationship," Jones said in an email. "Hardly ‘constructivist’ behavior.  And hardly the high road.”

Here is P&G’s detailed rebuttal of facts asserted by Peltz in the disputed commercial:

#1 – P&G’s stock price yesterday closed at $92.33. Ten years ago, on October 8, 2007, P&G stock closed at $70.71.

#2 – Fiscal Year 2017 marked the 61st consecutive annual increase in dividend payments to P&G shareholders and the 127th consecutive year P&G has paid a dividend.  The 2017 fiscal business year dividend was $2.70 per share.  Ten years ago, in 2007, the dividend was $1.28 per share.  10-year CAGR is +7.7%.

#3 – P&G earnings, as calculated through multiple measures, have increased over the past 10 years. 

 #4 – Market share on many P&G brands has increased over the past 10 years.  For example, in the U.S.:

·        Dawn dishwashing liquid in the U.S. has grown from 43.8% in fiscal year 2007/08 to 51.7% in 2017/18 fiscal year to date (FYTD).

·        Febreze air care in the U.S. has grown from 19.7% in ‘07/08 to 23.5% ‘17/18 FYTD.

·        U.S. Tide has grown from 40.2% in ‘07/08 to 42.1% ‘17/18 FYTD.

·        U.S. P&G Diapers has grown from 36.8% in ‘07/08 to 43.3% FYTD. Pampers has grown +4.2pts during the same period (balance growth is Luvs), from 30.2% to 34.4% FYTD.

Here is Peltz’s email to David Taylor:

From: Peltz, Nelson

Sent: Saturday, October 07, 2017 5:02 PM


Subject: $160 if P&G merely kept pace with peers


At your request, we reviewed the two television ads we were running in Cincinnati this weekend, and consulted with our lawyers about their content. The fact is over the last ten years P&G has clearly experienced market share loss. P&G’s stock price, EPS and dividend growth have all underperformed peers dramatically over the last decade.  These were the primary messages conveyed in these ads. If P&G had simply kept pace with its peers over the last 10 years, each share could be worth as much as $160 today. While we stand behind the messages and have concluded that there is no legal reason to stop running the ads, we asked the television stations to take them down last night right after we spoke. Furthermore, we have confirmed that the ads are no longer running. We did this consistent with our long-standing desire to work collaboratively with you and our agreement months back to both take the “high road” during this proxy contest.

However, I would note that I have felt very lonely walking the “high road” during the past month:

·         P&G’s September 19 Presentation contained a multitude of errors and misrepresentations about Trian’s and my track records, the vast majority of which were never corrected or publicly acknowledged. This includes misstated returns and manipulated time periods for companies we invested in, and misrepresentations about what occurred at those companies and the outcome of those investments;

·         P&G put out and continues to recirculate false and misleading claims about Trian’s intent to break-up the Company;

·         P&G filed proxy solicitation materials which implied that Trian intended to significantly cut jobs in Cincinnati, which statement P&G knew or should have known was false and misleading;

·         Besides the inflammatory local news cartoon P&G filed as proxy solicitation materials and distributed to shareholders, the Company also recirculated intellectually dishonest claims about job losses at companies we have been involved with;

·         P&G took out of context and misrepresented a quote from Mondelez Chairman & CEO Irene Rosenfeld in a letter to P&G shareholders which resulted in Irene Rosenfeld issuing a clarifying statement that same day;

·         P&G filed proxy solicitation materials last week that stated that the proxy advisory firms recommended me for the Board based on a “why not” standard – a statement that is explicitly false per the actual reports from the proxy advisory firms; and

·         P&G’s proxy solicitation materials contained numerous unfounded and personal attacks directed at Clayt Daley, a 35-year P&G veteran (and now a Trian advisor) who served the Company with distinction for decades.

In addition, in prior communications to shareholders, you stated that I have a history of operating with a US-centric approach, focusing on US operations. That is demonstrably false. I was Chairman and CEO of Triangle Industries, a Fortune 100 industrial company and the parent of American National Can Company, then the largest packaging company in the world. In addition, I have served on the boards of Mondelez International, Ingersoll-Rand (based in Ireland) and H.J. Heinz, all of which have significant international operations.

I hope you and  P&G will join me on the high road from now through the Annual Meeting.