Activist Investor Ackman Takes Stake in P&G

Stakeholder in JCPenney, Burger King, Target Has Played Turnaround Roles But Also Engendered Management Opposition

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William Ackman
William Ackman Credit: Bloomberg

Activist investor William Ackman has apparently taken a stake in world's-leading-advertiser Procter & Gamble Co., adding new pressure on a company that has disappointed Wall Street in recent months.

P&G stock rose as much as 3.8% in early morning trading on news of a filing by the Federal Trade Commission suggesting that Mr. Ackman's hedge fund, Pershing Square Capital Management, had taken a stake in the company. A spokeswoman for Pershing Square said only Mr. Ackman is authorized to speak on behalf of the company and that he's traveling.

P&G spokesman Paul Fox said in an e-mail: "We welcome investment in our company. We are focused on creating shareholder value by executing on our plan to deliver top and bottom-line growth through our $10 billion cost-savings program, renewing our focus on innovation, pricing initiatives and improved execution and reallocating resources to invest in the highest-return opportunities."

Mr. Ackman in recent years also has taken stakes in such high-profile marketers as Target , JCPenney and Burger King, often playing roles in turnaround plans, but he's no stranger to engendering management opposition. His high-profile proxy fight to elect a slate of directors at Target and engineer a breakup of the company failed in 2009, for example.

As a major investor in JCPenney, Mr. Ackman backed the hiring of CEO Ron Johnson from Apple there last year. But after Mr. Johnson hired away Target veteran Michael Francis and the "everyday low price" strategy they implemented met with falling sales, Mr. Ackman was also quick to admit the strategy wasn't working. In an interview with Bloomberg News, Mr. Ackman also said he was very comfortable having Mr. Johnson handle both CEO and marketing functions.

In other cases, such as Fortune Brands in 2010, Mr. Ackman has pushed for company breakups. Fortune broke up a business that included Jim Beam bourbon, Moen faucets and Master Locks.

In an e-mail, Deutsche Bank analyst Bill Schmitz said he expects Mr. Ackman to put pressure on Chairman-CEO Bob McDonald and the P&G board. But it's unclear yet what Mr. Ackman may pressure P&G to do.

Sanford C. Bernstein analyst Ali Dibadj recently did an extensive report outlining options for P&G to break up the company, contending such moves would increase shareholder value. In a research note, Mr. Dibadj said Mr. Ackman's move could "galvanize investor frustration" and that investors might rally around a "credible plan" that might include accelerating cost-cutting efforts, changing management or board makeup and/or spinning off parts of the company.

P&G has seen its sales decelerate, market shares slip and earnings projections fall this year, and its stock price was down 8% on the year prior to the news of Mr. Ackman's interest.

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