The Hanging Chads Point In Nelson Peltz’s Direction

We’ve got a real nailbiter as Peltz and Procter & Gamble move into the vote interpretation stage of the proxy contest.

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Procter & Gamble is incorporated and based in Ohio. But when searching for a key swing state metaphor to describe the company’s proxy battle with Nelson Peltz last month, a spokesman warned that if things got “really close, there’s a Florida situation.” Well, guess what?

Despite P&G’s proclamation of victory last month, however, it appears that Peltz is George W. Bush and the company is Al Gore: IVS Associates, the independent inspector counting the 2.6 billion shares voted during the testy election, Peltz is actually leading by 42,780, a margin of 0.0016%. To continue the presidential election comparison (Bill Ackman—who’s more of an Alf Landon in these scenarioswould approve), it’s as if Hillary Clinton won last year’s election by just 2,120 votes instead of, you know, three million, or, speaking of Florida, if Bush in 2000 had received 98 more votes than Gore rather than the 537 he actually took America’s worst and decisive state by that year.

Now, here’s where the Florida situation really kicks in: Since P&G isn’t just giving in on account of nearly half of their shareholders (at least) rather pointedly ignoring their pleas to keep Peltz far, far away from the boardroom, we move into the next phase of things, which those of you old enough to remember the year 2000 was the recanvas/hanging chad portion of the festivities. In proxy contests, however, it goes by the even better nom de guerre of snake pit!

The two sides now head to what is known in activist circles as “the snake pit,” in which P&G and Trian can investigate each contested vote. It is part of a certification process that checks whether shareholders had the authority to vote, signed and marked ballots correctly and to verify that no vote was counted more than once….

Shareholders can vote many times, though only the last vote counts. Typically, shareholders receive dozens of proxy cards. In this case, P&G sent out blue voting cards, while Mr. Peltz mailed out white cards. IVS counters must determine if a ballot is a shareholder’s last or only vote. The decision can be challenged by either camp. IVS makes the final call.

We don’t know about you, but we like Nelson Peltz’s chances in a snake pit. Of course, it’s quite clear that P&G is as deadly serious about keeping what CEO David Taylor called Peltz’s “good advice” off the board as Peltz is about crashing the party. And once you’ve spent $100 million on something, the marginal costs of keeping up the battle to save face must seem trivial. So for all we know at this point, Peltz v. P&G may well end up decided in the same place that Bush v. Gore met its end: the Supreme Court.

Of course, there is one really good reason to do whatever it takes to stop Peltz, and that is that Peltz is pissed and unlikely to be very pleasant to be around. And also he probably wants to smash the company to bits with a sledgehammer from within.

At the end of Procter & Gamble’s historic annual shareholders’ meeting in October, the climax of the biggest, most expensive proxy fight in corporate history, the two antagonists shook hands. “We’ll talk,” said CEO David Taylor, who thought he had won by a slim margin, though a careful count of paper ballots showed some five weeks later that he’d lost. To which activist investor Nelson Peltz replied, “We’ll talk, but we don’t listen!” (the “we” referring to P&G’s top leaders and directors)….

P&G insiders suspect that while Peltz hasn’t called for a breakup, he may secretly favor one. He wants P&G reorganized from 10 global business units into just three “stand-alone” businesses within “a lean holding company.” From that structure to a breakup would be only a small step.

So reserve some venom, boys: The snake pit is only the start of a seriously nasty and, potentially for Taylor’s career, fatal little fight.

Activist Peltz Narrowly Wins P&G Board Seat, New Count Shows [WSJ]
Trian’s Peltz claims win in Proxy fight, P&G says not yet [Reuters]
Deadlocked battle between P&G and activist Peltz about to get more vicious in the ‘snake pit’ [CNBC]
With Nelson Peltz on the Board, Will P&G Finally Break Up? [Fortune]