Nelson Peltz and Mike Weinstein Win Board Seats with Heinz

Corporate activist Nelson Peltz and another dissident investor who campaigned for changes at H.J. Heinz Co. appear to have won seats on the famed ketchup maker’s board, according to preliminary voting results released Friday.

Heinz said initial results showed that Peltz and his ally, Michael F. Weinstein, won seats on the 12-member board along with 10 of the dozen people nominated by the company following a long battle over how to lift the company’s sagging stock price.

Peltz and his Trian Group, collectively Heinz’s second-largest shareholder with a $750 million ownership stake, nominated five candidates to the Heinz board earlier this year as part of an effort to force the company to ratchet up shareholder returns.

The group has pushed for dramatic cost-cutting measures and greater investment in Heinz brands, particularly its storied ketchup, after members began accumulating shares in February.

But Heinz repeatedly dismissed Trian’s approach as too aggressive, saying its proposal to cut annual costs by $575 million and reduce retailer-related expenses by at least $300 million would leave the company crippled.

Heinz has touted its own growth plan, which also calls for reduced expenses and beefed-up marketing. The company says it expects to save $355 million over the next two years by cutting 2,700 jobs and selling or divesting from 15 plants this fiscal year. Heinz also announced that it was seeking two additional directors, expanding the board from 12 to 14 seats.

Analysts say the activist board members pose a challenge for Heinz, and that the two sides will have to learn to work together after months of acrimonious relations.

“It cannot afford an internal war among board members, and shareholders don’t want that either,” said Stephen Davis, president of Madison, Conn.-based Davis Global Advisors Inc. “They didn’t elect these two to fight management. They elected those two to make for a more energized board.”

He said the “hopeful scenario is that this is good news” and that “it ends a period of complacency and it augurs a more active oversight of the company. It’s going to be tough.”

The proxy results come less than a month after the company’s annual shareholder meeting on Aug. 16, the culmination of a drawn-out battle that raged through the spring and summer.

Trian attacked Heinz for its lackluster stock performance and said restructuring efforts had failed since William R. Johnson, the company’s chief executive, took the helm eight years ago.

Heinz took out newspaper advertisements, appealed to shareholders for support and even distributed ketchup bottles to its Pittsburgh employees that bore a label reading, “White Card is the Right Card,” a reference to Heinz’s proxy ballots.

It blasted Trian’s nominees as unqualified, saying they fell short of Heinz’s corporate standards and would create divisions on the board. Besides Peltz and Weinstein, Trian had nominated Peltz’s longtime business partner, Peter W. May, his son-in-law, Edward P. Garden, and professional golfer Greg Norman.

Heinz chief executive Johnson said Friday that “the Heinz board will be focused on executing our plan.”

“We are confident that we have the brands and the people to build on our business momentum and create a strong and prosperous future for Heinz,” he said. “I look forward to moving ahead constructively and working closely with the board to enhance shareholder value.”

Heinz spokesman Michael Mullen said the company remained on track to deliver 10 percent earnings growth for the year.

Last week, Heinz reported a 23 percent jump in fiscal first-quarter profit, partly due to growth in sales of its Weight Watchers Smart Ones and other products.

The company said the results follow a four-year restructuring plan to encourage growth in three food categories ketchup and sauces, meals and snacks, and infant nutrition. It has been selling underperforming European businesses as part of that strategy.

Trian, meanwhile, called the preliminary results “a big victory for all Heinz shareholders.”

“There is clearly a desire for positive change at Heinz, and we are gratified by the apparent election of Nelson Peltz and Michael F. Weinstein to the board, and the mandate shareholders have given us to help reinvigorate Heinz and unlock the full value of its iconic brands,” it said.

Final voting results are expected to be certified Sept. 15 unless a review and verification process takes longer than anticipated, according to Heinz.

Heinz said it expects the following directors to be re-elected: Charles E. Bunch, Leonard S. Coleman Jr., John G. Drosdick, Edith E. Holiday, William R. Johnson, Candace Kendle, Dean R. O’Hare, Dennis H. Reilley, Lynn C. Swann and Thomas J. Usher.

Board members Peter Coors and Mary Choski are not expected to be re-elected, according to Heinz.

Peltz, 64, is known for leading high-profile corporate buyouts. His Triarc Cos. Inc. bought Snapple for about $300 million in 1997 and sold it along with other drink assets in 2000 for $1.5 billion.

Weinstein, 57, is a former Snapple executive and has been chairman of INOV8 Beverage Co. LLC, a company he co-founded, since January 2005.
Heinz shares fell 33 cents to $41.74 in midday trading on the New York Stock Exchange.