P&G Apparently Beat Peltz by a Sliver -- WSJ

Expensive proxy fight is now headed to a weekslong recount to determine outcome

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 17, 2017).

Procter & Gamble Co. said it beat Nelson Peltz by 6.15 million votes, only about 0.2% of its shares outstanding, a slim difference that is now headed to a weekslong recount to determine the final outcome of the most-expensive proxy fight in history.

The consumer giant had announced at its annual meeting in Cincinnati last week that its preliminary tally of votes showed the 11 board nominees were elected. The announcement surprised the activist camp whose own tally seemed too close to call.

The company hadn't released the actual preliminary tally until Monday, when it disclosed in a securities filing that Mr. Peltz received 973 million shares and that the P&G director with the least number of votes, Ernesto Zedillo, won 979.2 million. Mr. Peltz's campaign had sought to replace Mr. Zedillo, the former president of Mexico, though the activist investor pledged to attempt to add him back if Mr. Peltz won.

Mr. Zedillo got 48.9% of the shares voted at the meeting, while Mr. Peltz received 48.6% of the vote, according to P&G's preliminary tally.

"Trian continues to believe that the election is too close to call," Mr. Peltz's Trian Fund Management said on Monday, adding that the initial results are based "on estimates and incomplete information." For its tally, the company had to estimate votes by individuals that supported Mr. Peltz and cast their ballots directly to his fund.

P&G said Monday that it could take several weeks for an independent inspector to confirm the results. "P&G shareholders have spoken," a company spokesman said. "Our focus continues to be on delivering the results shareholders expect of us and we expect of ourselves -- and we're on the right track."

"We are confident in the conclusion that we reached last week," he said.

Trian said last week it wouldn't concede until an independent arbiter had a chance to certify the votes, a process that now looms.

Mr. Peltz said last week that, by Trian's count, his side was ahead by 175 million votes on the morning of the shareholder meeting. It was aware some big shares, including the roughly 7.5% that was controlled by employee plans, hadn't yet been counted. "Whether we won or lost, it will be by less than 1%," he said.

P&G executives were subdued in their response immediately after the vote. "The preliminary proxy results is all I had," P&G Chief Executive David Taylor said when asked last week about Trian's contention that he declared victory too soon. Mr. Taylor won re-election with 1.93 billion shares voted for him.

Shareholder voting is already a complicated and opaque process but the uncertainty of the P&G vote was increased by an unusual amount of shares held by small investors, leaving both sides scrambling for support from some 2.5 million shareholders instead of just a few dozen. About 40% of P&G stock is owned by retail investors, compared with an average of about 12% in the S&P 500, according to S&P Global Market Intelligence.

On top of that, a significant chunk of the shares were also owned in the actual name of the investors, instead of just brokerage names, which is far more typical. The votes from those shares are only sent to the side who they are voting for, meaning both P&G and Trian had blind spots as they tried to determine the outcome. The P&G disclosure Monday still didn't include such votes that went to Trian, though it estimated what it believed Trian won.

All of the votes are now in the hands of an independent firm, which will issue its own preliminary tally in coming weeks. After that, begins a certification process that will check if shareholders had the authority to vote, signed and marked ballots correctly and to verify that no one voted more than once.

Errors have been caught in the past, such as in 2008 at Yahoo Inc. when the company declared then-chairman Jerry Yang had received support from 85.4% of the shares, despite Carl Icahn campaigning against him. Fund manager Capital Research & Management quickly questioned the vote given its entities owned about 16% and had withheld support. It turned out the Capital vote was mostly missed, which was attributed to an unusual technical glitch.

Mr. Yang was still elected, but such a change at P&G could swing the vote.

In the 11 activist-forced elections this year over a minority board change, like P&G, the average margin of victory was 29% of share outstanding, with boards winning seven, according to Proxy Insight, which tracks votes. The closest margin was 1.3%, when Wayne Savings Bancshares Inc. defeated Stilwell Value LLC.

Some have questioned how accurate any counting of ballots can be, especially in large votes. In a speech last year to investors, Delaware Vice Chancellor J. Travis Laster said the current system "makes precision impossible" and suggested turning to blockchain technology that is the basis of Bitcoin to revamp traditional voting.

Write to David Benoit at david.benoit@wsj.com and Sharon Terlep at sharon.terlep@wsj.com

(END) Dow Jones Newswires

October 17, 2017 02:47 ET (06:47 GMT)