Activist investor takes stake in Procter & Gamble
Yesterday, William Ackman confirmed with Dealbook.com that his hedge fund company had taken a big stake in Procter & Gamble
Earlier yesterday, before the news was confirmed by Ackman, speculation was driven by both investor activity combined with reports from several major news providers, including The New York Times and The Wall Street Journal, together with an initial report in briefing.com.
The initial report pointed to a notice from the Federal Trade Commission that gave Pershing permission to take a stake in Procter & Gamble, which has become the subject of investment speculation on the back of stagnant sales and tumbling profits.
Shares almost at year-high
Reflecting the positive reception of investors to the news, shares closed up almost 4 percent yesterday at $63.70, reversing a steady decline in recent months and putting at a close to a year-high.
Although Ackman has not confirmed exactly how big the stake will be in P&G, he did confirm that the investment will make his company a major shareholder, while confirming his belief that the stock is undervalued and represents a ‘great opportunity’ for the company.
Ackman 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.
Industry observers and market analysts have been speculating for some time now over what the future will hold for P&G, which has included a lot of discussion about business strategy and restructuring.
Last month Cosmetics Design reported on how an analyst at Sanford C. Bernstein had stated his belief that Procter & Gamble could become a more efficient business it if were to break up into smaller business units.
Will the company's business structure be redefined?
The company should consider splitting the business into smaller more manageable business units if it continues to see profits slide throughout the current financial years, Bernstein analyst Ali Dibadj wrote in his notes.
Dibadj estimates that if the company were to be broken up next year it would help grow the business value to an estimated $208m based on current earnings projections, a significant leap given that the company is currently estimated to be worth $171m.
In recent years the company has focused on spending in emerging markets, where market growth has continued to grow well ahead of the developed markets, specifically the US and Europe.