After a few losing investments, activist investor Bill Ackman finally scored a win today. Procter & Gamble announced that Alan George “AG” Lafley is coming out of retirement to replace Bob McDonald. Just a few weeks ago, Ackman said time was running out for McDonald to show improvements in the company’s performance.
P&G is one of Ackman’s largest investments through his hedge fund, Pershing Square, and he has been pushing for changes at the consumer products company since last year. During the Ira Sohn hedge fund conference on May 8, Ackman said McDonald had been distracted by the 21 boards he sits on besides P&G’s. Ackman also argued that P&G is underperforming, with organic growth at 3% while its competitors are at 7%.
P&G called on a familiar face to replace McDonald. Lafley was CEO until he retired in 2009, after which McDonald took his place. Both men had been at P&G for decades. The company sells everything from Charmin toilet paper to Pampers diapers to Tide detergent.
Ackman has lately been in the news for his high profile losses at JC Penney. He bought a large stake in the retailer and recruited Apple stores guru Ron Johnson to become JC Penney’s CEO. But Johnson got rid of JC Penney’s popular discounts, causing sales to plunge. The company now has a new CEO, Johnson’s predecessor, Mike Ullman.
Ackman also had a public spat on CNBC with rival activist investor Carl Icahn regarding their differing views on Herbalife. Ackman has accused the company of being a pyramid scheme while Icahn has defended Herbalife. The two also have a history of lawsuits against each other.
So the P&G win is much-needed good news for Ackman. It’s also good news for activist investors, who have been going after bigger targets lately. P&G had been seen as one of those companies that was so big, no activist investor could buy enough shares to matter. P&G’s market capitalization is about $215 billion, and Ackman’s Pershing Square owns about 1%.
The shakeup at P&G will likely encourage activist investors to go after other big fish.