The ongoing calls to bring change at Procter & Gamble Co. (NYSE: PG) are growing. The company’s shares have become stuck and many investors feel that the company has grown too large to be able to manage itself. With a $175 billion market cap, we cannot help but wonder how much an activist investor can influence change here. We want you to read first, but there is a poll to take at the bottom.
Bill Ackman of Pershing Square has reportedly been given permission from the Federal Trade Commission to proceed with this investment that could enable a change in control procedure. Reports are out that Ackman has taken a large stake.
Other market pundits have been calling for change here as well, and even Jim Cramer of CNBC has commented on the matter. Both Kimberly-Clark Corporation (NYSE: KMB) and the much lower yielding Colgate-Palmolive Co. (NYSE: CL) have outperformed P&G’s share performance. Warren Buffett via Berkshire Hathaway Inc. (NYSE: BRK-A) has unloaded some of the P&G stake and the latest position was down to 76.7 million shares from the 96.3 million shares in prior quarters as the situation is a maturing one.
The good news for new investors looking to take a stake in P&G is that the stock now has a higher dividend yield than the rival Kimberly-Clark Corporation (NYSE: KMB) at closer 3.6% versus about 3.5% and there is now a relative ‘yield bubble’ in Kimberly-Clark Corporation (NYSE: KMB) along with several other key dividend and safety stocks where the price is way above the consensus analyst price target objective.
We cannot help but wonder just how large of a stake it would take to effect change here for P&G. A market capitalization rate of $175 billion requires some deep pockets for activist investing. The first 5% hurdle requiring 13D filings would run $8.75 billion if the shares were purchased outright without getting others to just proxy their shares. Taking a 10% stake would require a whopping $17.5 billion based upon today’s value.
JON C. OGG