Procter & Gamble Co. (NYSE:PG) has dismissed calls from one of its largest shareholders to boost shareholder value by reorganising its business units.
The consumer products giant said activist investor Nelson Peltz’s proposal would result in higher costs, reduced profits and another restructuring that could result in the break-up of the company.
READ: Procter & Gamble fourth quarter earnings beat forecasts after cutting costs
In a 93-page plan for improving the business, Peltz's Trian Partners recommended P&G be organised into three largely autonomous business units and that the company should invest in smaller, high-growth brands and prioritise its online strategy.
Trian Partners said P&G continues to suffer from eroding market share, aging brands, high costs and a “suffocating bureaucracy”.
“P&G has resorted to short-term measures, such as selling brands instead of fixing them, that did not address the root cause of its underperformance,” it said.
The recommendations from Trian Partners – which owns about US$3.5bn worth of P&G’s stock – is part of Peltz’s battle for a seat on the board.
Peltz's suggestions value destructive
In response to the yesterday’s paper, P&G said in a statement today that Peltz had “a very outdated and misinformed view” of the business and its proposals contained “nothing substantive”.
"Mr. Peltz's suggestions would be value destructive, and we believe it represents another example of his misguided view of P&Gs business," P&G said.
The company added: "P&G is confident it has the right plan, the right structure and the right Board in place to continue its successful transformation and deliver results and shareholder value for the short-, mid- and long term.”
Shares were little changed in US pre-market trading, changing hands at US$92.72 each, down 0.02%.
P&G owns well-known brands such as Bounty, Gillette and Tide.