Activist hedge fund hunk Bill Ackman bought a stake in Procter & Gamble Co. (P&G), increasing pressure on Chief Executive Officer Robert McDonald, who already was under attack from investors after three forecast cuts this year.
The stake is the largest initial investment in a company by Bill Ackman’s hedge fund Pershing Square Capital Management LP, Ackman said, while declining to give a specific figure.
McDonald has faced criticism amid slowing sales in the U.S. and Europe and questions about whether his pricing and cost- cutting measures and his sale of the Pringles brand is enough to improve results. The stock had dropped 8 percent this year through yesterday.
“Procter has languished for so long,” Connie Maneaty, an analyst at BMO Capital Markets in New York, said in an interview. “There has been the perception that Procter is so big that investors have little say, and maybe the significance is that if an activist base does grow, that meaningful change can be effected.”
P&G, based in Cincinnati, rose 3.7 percent to $63.70 at the close in New York, the biggest gain since Oct. 29, 2009.
P&G, the maker of Tide laundry detergent and Duracell batteries, most recently cut its profit forecast last month, citing currency fluctuations and rising commodity costs, even as competitors reaffirmed their projections. In February, McDonald, who took over three years ago, announced a $10 billion cost- reduction plan that included 5,700 job cuts.
Bill Ackman this year won an effort to remove Canadian Pacific Railway Ltd. (CP) CEO Fred Green and replace him with Hunter Harrison.
Bill Ackman pushed Fortune Brands Inc. (FBHS) to break up, and the company last year split into spirits maker Beam Inc. (BEAM) and a company that sells home products such as faucets and locks. More than two years ago, he led a failed effort to get Target Corp. (TGT) to sell its card unit and divest its land holdings into a real estate investment trust.
“He’s involved because they have several business units that could possibly be spun off,” Louis Meyer, a special- situations analyst at Oscar Gruss & Son Inc. in New York, said in an interview.
P&G should consider a break-up if its earnings don’t improve this year, Ali Dibadj, an analyst at Sanford C. Bernstein & Co., wrote in a report last month.
Pershing’s presence could “galvanize palpable investor frustration with respect to P&G’s recent performance and current direction,” Dibadj said today in a note. Strategies to explore should include management changes, more rapid cost cutting and a potential breakup, he said.
“We welcome investment in our company,” Paul Fox, a P&G spokesman, said in an e-mailed statement. “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.”
Mitch Katz, an FTC spokesman, declined to give any details about the deal and wouldn’t confirm the agency reviewed it. U.S. law requires deals valued at $68.2 million or more to be reviewed by antitrust regulators.
Read More: Bloomberg