P&G responded directly to recent media reports concerning McDonald’s current status on the executive board, referring to them as ‘erroneous’ and reaffirming that his position is not under threat.
“The Board is overseeing a plan to return P&G results to levels that produce the best long term value for shareholders; unanimously supports the plan and Chief Executive Officer, Bob McDonald, as he leads its implementation; and is monitoring its effectiveness,” the statement said.
Ackman says stake will give him influence
The statement was filed yesterday with the US Securities and Exchange Commission, on the same day that activist shareholder Ackman revealed the extent of his recent investment in P&G.
Last week Ackman revealed that he had made a significant investment in P&G through his hedge fund company Pershing Square, without detailing the extent of the stake.
Yesterday he confirmed that the total value of the investment was the purchase of $1.8bn in P&G stock, together with some as yet unspecified options, a stake that is estimated to be less than 1 percent of the total business.
Activist shake-up?
Ackman made the announcement at the Delivering Alpha Conference in New York, where he reaffirmed his belief that he can influence the P&G executive board, and said he was looking forward to meeting McDonald.
He has established himself as an activist shareholder in the last ten years or so, targeting large companies suffering from struggling financials or ill-defined business strategies.
In the past he has invested in companies such as Beam, Target and Canadian Pacific Railway, where he has often tried to use his shareholder influence on the executive board to bring about big changes that have shaken up business strategies and given the companies in question new direction.
Tough times for P&G
Ackman’s arrival on the scene comes as P&G has been delivering increasingly compromised financial results during the course of the last year. The most recent second quarter results showed that sales growth had slowed to 4 percent, giving total group sales of $21.35bn.
However, net earnings took a big tumble, falling 49 percent to $1.71bn, compared to $3.36bn in the corresponding quarter last year. For the full six months, this figure fell by 26 percent to $4.77bn.
In response to the falling profits, the company announced a restructuring program that shifts the investment focus away from the emerging markets in an effort to plug the growing gap that is appearing in its performance in developed markets.