Procter & Gamble – Will Lafley’s Breakup Plan Jump-Start PG?

Procter & Gamble’s (PG) stock came to life last Friday after P&G chief executive A.G. Lafley revealed plans to shed some 90 to 100 non-core businesses, or more than 50% of its brands. The fact that PG stock has been flat (including dividends) despite Friday’s 3% — and has been virtually dead for more than a year — is just about all you need to know as to why. PG stock has stagnated thanks to slumping sales amid a host of crosswinds, not the least of which have been tied to impact of foreign exchange given P&G’s global exposure, a deep-discount environment and a more value-oriented consumer.

What does this mean for shareholders? After all, PG is famous for shareholder-friendiness thanks to its status as a dependable dividend stock, and plans to buy back some $5 billion to $7 billion of its own shares in fiscal 2015. But that matters little if Lafley is unable to generate more shareholder value in some way — such as streamlining the business. How a company winds up with 90 businesses that are deemed “non-core” is perplexing, but if it’s going to happen, it’ll happen at a company like Procter & Gamble, with a rich, storied history dating back 175 years. In fact, Sanford C. Bernstein analyst Ali Dibadj believes if P&G doesn’t exhibit signs of a turnaround in a year from now, it might need to consider a breakup of the company.

Source: InvestorPlace

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