Will P&G fight hedge fund's bid for board seats?

Trian Fund Management, which invested $3.2 billion early this year, submitted a filing with the consumer products giant, according to CNBC, which cited a "source close to the matter."

The move increases pressure on P&G, which has promised to return to consistent growth but failed to jumpstart sales after five years of restructuring.

The bid potentially sets the stage for a contested race for board seats at P&G's annual meeting, which usually takes place in October. A seat or two on the board would give Peltz representation on the panel that approves the company's strategic direction and can hire or fire the CEO.

But Peltz may not be eligible to be nominated for the required shareholder vote to get on the 11-member board.

Last year, P&G changed its rules for outside investors to nominate board members.

Under the new rules and the current board composition, an investor or group of investors of as many as 20 can nominate as many as two or three candidates for board seats.

But that investor or group must hold at least 3 percent of P&G's outstanding shares, or 76.7 million shares worth $6.9 billion. Only three major institutions have a stake large enough to meet that minimum holding: Vanguard Group, State Street and BlackRock.

Even though Peltz's P&G holdings would appear to put him halfway toward the threshold required to nominate potential board members, P&G's rules also require outside investors must hold their stake for three years before they can make valid nominations.

Other rules might block Peltz from the board. He currently serves on the boards of three publicly-traded companies, Wendy's, Mondelez International and Sysco. P&G rules limit its board members to two outside public company boards.

Finally, Peltz is 74 years old. P&G's rules say board members must resign after turning 72, unless a board majority agrees to an exception to the retirement age.

Unless P&G's board itself decides to nominate Peltz for the board, Peltz will have to rally a group of institutional investors to press for outside board nominations.

The activist investor has successfully pressed previous investment targets for board seats for himself or representatives, including Heinz and Kraft Foods before they merged, as well as Pepsico and DuPont.

"Peltz is upping the ante," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "He's a very credible guy. The question is can he convince shareholders he's right?"

Trian and P&G officials would neither confirm nor deny that Peltz was making a bid for P&G's board.

P&G's proxy, which will spell out items for shareholder voting, is expected to be released later this summer.

P&G will accept investor board nominations