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CNBC Exclusive: CNBC Transcript: Trian Partners CEO and Founding Partner Nelson Peltz Speaks with “Squawk on the Street” Today

WHEN: Today, Friday, September 8, 2017

WHERE: CNBC's "Squawk on the Street"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Trian Partners CEO & Founding Partner Nelson Peltz on CNBC's "Squawk on the Street" (M-F, 9-11am ET) today, Friday, September 8, 2017. Following is a link to the interview on CNBC.com: https://www.cnbc.com/video/2017/09/08/nelson-peltz-on-pg-market-share-more-important-metric-than-eps.html.

All references must be sourced to CNBC.

SARA EISEN: INVESTOR NELSON PELTZ UNVEILING HIS PLAN TO BOOST GROWTH AND PERFORMANCE AT PROCTOR & GAMBLE IN A 94 PAGE WHITE PAPER THIS WEEK. HIS FIRM TRIAN PROPOSING CHANGES IN THE ORGANIZATIONAL STRUCTURE AT P&G AND CALLING FOR PELTZ TO TAKE A SEAT ON THE BOARD. THE COMPANY HAS FOUGHT BACK ON THIS ONE AND JOINING US NOW ON THE PHONE IS NELSON PELTZ, TRIAN PARTNERS CEO AND CO-FUNDING PARTNER. THANK YOU FOR CALLING IN.

NELSON PELTZ: WELL THANK YOU SARA GOOD MORNING. GOOD MORNING DAVID AND GOOD MORNING MIKE.

EISEN: GOOD MORNING TO YOU BACK. NOW THERE WAS A LOT HERE TO CHEW ON. IF THERE'S ONE TAKE AWAY YOU WANT P&G SHAREHOLDERS TO HAVE FROM YOUR REPORT, WHAT IS IT?

PELTZ: LOOK, AS YOU KNOW SARA, I HAVE BEEN OPERATING IN THE CONSUMER SPACE FOR WELL OVER HALF OF MY CAREER AND GIVEN MY GRAY HAIR THAT'S A LONG TIME. THE MOST IMPORTANT METRIC IN THE CONSUMER SPACE IS MARKET SHARE AND THATS SOMETHING THAT IS VITAL AND TODAY THE MARKETS LOOK AT MARKET SHARE ALMOST EVEN MORE IMPORTANTLY THAN THEY DO EPS AND PEOPLE DON'T EVEN PAY ATTENTION TO THEIR EPS IN FACT AMAZON IS A PERFECT EXAMPLE OF IT. THEY TAKE MARKET SHARE AND PEOPLE DON'T EVEN PAY ATTENTION TO THEIR EPS AND I'LL TELL YOU THAT THE HARDEST THING TO DO IN THE CONSUMER SPACE IS TO REGAIN LOST MARKET SHARE. IT'S ONE THING TO GET A CONSUMER TO TRY YOUR PRODUCT AND HOPEFULLY LIKE IT. IT'S ANOTHER THING TO HAVE A CONSUMER TRY YOUR PRODUCT, USE YOUR PRODUCT AND THEN HAVE ANOTHER COMPANY GIVE YOU SOMETHING THAT YOU LIKE BETTER AND SWITCH ITS REALLY HARD TO GET YOU TO SWITCH BACK AND THAT'S WHAT P&G NEEDS TO BE DOING TODAY. NUMBER ONE IS FIGURING OUT HOW TO REGAIN MARKET SHARE THAT IT LOST AND HOW TO GROW MARKET SHARE ONCE AGAIN.

EISEN: AND WE HAVE BEEN SHOWING THE CHARTS THAT YOU PROVIDED IN THE PAPER SHOWING THAT LOSS OF MARKET SHARE VS THE PEERS. YOU PROPOSE A NEW STRUCTURE THREE BUSINESS UNITS EACH WITH AROUND $20 BILLION IN REVENUE THE COMPANY SAYS THEY CONCLUDED THAT APPROACH WOULD RESULT IN HIGHER COSTS, LOWER EFFICIENCY, REDUCE PROFITS AND ADDED LAYER OF MANAGEMENT COMPLEXITY THEY SAID THEY LOOKED AT IT AMONG OTHER OPTIONS. ARE THEY WRONG?

PELTZ: THEY ARE. ABSOLUTELY WRONG. WHAT YOU HAVE -- YOU HAVE SO MANY PEOPLE AT CORPORTATE TODAY THAT NEED TO BE INSIDE THE GBU. YOU HAVE A GLOBAL BUSINESS UNIT YOU HAVE TEN OF THOSE. YOU HAVE SIX SMOs WHICH ARE SALES, MARKET ORGANIZATIONS. AND THEYRE SEPARATE THEY WILL TELL YOU THAT THEY WORK WITH ONE ANOTHER AND THE PRESIDENT OF THE SMO AND THERE ARE SIX OF THEM. HE IS NOT REPORTING TO THE GBU THE GLOBAL BUSINESS UNIT. OUR GOAL IS TO HAVE THREE STAND ALONE GLOBAL BUSINESS UNITS, A VERY LEAN HOLDING COMPANY ABOVE IT AND THEN INSIDE THAT GBU. ALL THE GEOGRAPHIES REPORT, ALL R&D REPORTS, ALL SALES AND MARKETING, ALL FUNCTIONS REPORT INTO THAT GBU AND ITS GEOGRAPHY BECAUSE THATS WHERE THE ACTION IS OCCURRING TODAY YOU KNOW ITS SMALL BRANDS, ITS LOCAL BRANDS AND ITS BRANDS THAT HAVE SOME EMOTION ATTACHED TO IT THAT HAVE SOME VALUE AND IM NOT TALKING ABOUT PRICE, THAT ARE GOOD FOR THE ENVIRONMENT OR ORGANIC AND THIS IS SOMETHING THAT P&G DOES NOT DO WELL. IN FACT THEY DOUBLED DOWN OVER THE LAST COUPLE YEARS BY SELLING 100 BRANDS AND THOSE 100 SMALL BRANDS THEY WERE BOUGHT BECAUSE THEY WERE MEANT TO BE THE FUTURE OF P&G AND INSTEAD THEY ARE OPERATING ON A GLOBAL PLATFORM WITH GLOBAL BRANDS AND THEY DON'T KNOW HOW TO OPERATE WITH THE SMALL BRANDS AND THE SMALL BRANDS ARE TAKING MARKET SHARE IF YOU LOOK AT THE SLIDE WE PUT FORTH THAT SHOWS THAT P&G IS LOSING MARKET SHARE. WE STARTED ON ONE BAR GRAPH IN THE LOWER LEFT, 2011 TO 2017 WHERE P&G WAS GROWING AT 14%, PEERS 22% AND THE MARKET AT 28% AND THEN YOU LOOK AT WHEN DAVID TAYLOR TOOK OVER P&G WAS GROWING AT 3%, PEERS AT 6% AND THE MARKET GROWTH AT 7% NOW ITS HARD FOR THESE BIG GUYS, THE PEERS, TO COMPETE WITH THE DIGITAL COMPETITION. BUT P&G IS LOSING SIGNIFICANT MARKET SHARE TO BOTH AND OUR STRUCTURE WILL ENABLE P&G –

EISEN: NO, ON YOUR STRUCTURE THEY SAY IT'S A PRECURSOR TO A BREAK UP OF THE COMPANY. CALL IT YOUR COOKIE CUTTER PLAN.

PELTZ: THEY CAN SAY WHATEVER THEY WOULD LIKE, WE POINT VERY VERY CLEARLY THAT WE ARE NOT SUGGESTING THE COMPANY BREAK UP. WE WANT TO RUN LIKE A SERIES OF SMALLER CONNECTED BUSINESSES THAT ARE FAST MOVING MUCH MORE LOCALLY ADEPT AND MORE FIT TO COMPETE TODAY IN A VERY CHANGING, RAPIDLY CHANGING ENVIRONMENT.

DAVID FABER: NELSON THOUGH THEY COME BACK TO YOU IN TERMS OF THIS PLAN TO SPLIT THE THREE PARTICULARLY AS IT RELATES TO DISTRIBUTION OF PRODUCTS AROUND THE WORLD WE ARE TALKING ABOUT A COMPANY WHERE 2/3 OF THE SALES IS INTERNATIONAL AND THEY POINT OUT WITHOUT SCALE THAT DISTRIBUTION PARTICULARLY IN THE SMALLER MARKETS AROUND THE WORLD TRULY BE HURT. WHAT IS YOUR RESPONSE TO THAT?

PELTZ: MY RESPONSE TO THAT IS VERY CLEAR. IF THESE THREE GBU HEADS WANT TO WORK AND COMBINE DISTRIBUTION THEY CERTIANLY CAN DO IT AND THE CEO JOB IS TO URGE THEM TO WORK TOGETHER BUT I WANT TO ELIMINATE A COST CENTER CALLED DISTRIBUTION. I WANT IT TO BECOME A PROFIT CENTER BY HAVING IT REPORT DOWN BELOW INSIDE THE GBU INSTEAD OF BEING A FUNCTION WHICH IS JUST THE COST CENTER AND NOBODY IS WATCHING THE COST AND WHEN YOU RUN A FUNCTION, DAVID, THE ONLY POWER THAT YOU HAVE IS MORE PEOPLE ITS NOT THE POWER OF P& L BECAUSE YOU DONT HAVE A P& L.

FABER: NELSON, WHEN YOU BEGAN THIS INTERVIEW WITH US YOU CITED OF COURSE YOUR EXPERIENCE OVERALL, YOU KNOW, THEY MAKE THE CASE THAT YOURE EXPERIENCE IS LIMITED TO FOOD AND BEVERAGE COMPANIES NOT HOUSEHOLD AND PERSONAL CARE CATEGORIES. AND WHILE THIS HAS BEEN A FAIRLY CIVIL BATTLE SO FAR THEY DID SAY THE BOARD MANAGEMENT TALKED TO DIRECTORS AND CEOs AND OTHERS WORKED WITH YOU AND POSITIVE RECOMMENDATIONS WERE NOT FORTH COMING SAYING SEVERAL PEOPLE WOULD ONLY SPEAK CANDIDLY ABOUT THEIR EXPERIENCES WITH YOU IF THOSE DISCUSSIONS WERE KEPT CONFIDENTIAL FOR FEAR OF RETRIBUTION AND CONCLUDING OF COURSE THAT ADDING YOU TO THIS BOARD WOULD BE A SIGNIFICANT DEPARTURE FROM ITS GOVERNANCE BEST PRACTICE. WHAT'S YOUR RESPONSE TO THAT?

PELTZ: MY RESPONSE TO THAT IS SEVERAL FOLD. FIRST OF ALL, THERE'S A LOT OF FEAR OBVIOUSLY ON THEIR PART IF THEY'RE WILLING TO SPEND OVER 150 BILLION DOLLARS TO KEEP ME OFF THE BOARD. BUT YOU KNOW, WHEN THEY MADE THAT STATEMENT, ON THE BOARDS THAT I SERVED UPON, I'VE - THERE HAVE BEEN 13 CEOs AND OR CHAIRMEN. CERTAIN CASES THE ROLES WERE SPLIT, OTHER CASES THEY WERE TOGETHER. WE CONTACTED ALL 13 OF THEM RIGHT AFTER THEY MADE THAT STATEMENT. AND AS OF MID-AUGUST, WHICH WAS POST THAT STATEMENT, NOT ONE OF THEM HAS BEEN CONTACTED. NOT EVEN – I GET WHETHER THEY SAID GOOD THINGS OR BAD THINGS, NO ONE CONTACTED THEM. OKAY, SO THAT'S JUST NOT TRUE. IF THEY SPOKE TO A RANDOM DIRECTOR HERE OR THERE OR THERE AND THEY DIDN'T LIKE SOME OF THE SUGGESTIONS THAT I MADE, THAT'S FINE. BUT GO TO THE CEO AND GO TO THE CHAIRMAN. WE WENT TO EVERY ONE OF THEM, 13 OUT OF 13, AND NOT ONE, NOT ONE WAS CONTACTED. YOU KNOW DAVID, IN MID MAY, I MET WITH JIM MCNERNEY THE LEAD DIRECTOR AND DAVID TAYLOR. AND IT WAS AT THAT MEETING THAT I ASKED OFFICIALLY FOR A BOARD SEAT. I WAS TURNED DOWN IMMEDIATELY, NOBODY SAID GIVE US 24 HOURS, GIVE US A WEEK, WE NEED TO POLL THE BOARD. I WAS TURNED DOWN IMMEDIATELY, RIGHT ON THE SPOT. NOW THERE WERE ONLY TWO DIRECTORS THERE. DAVID AND JIM. AND THEN THEY GO ON TO COMPLAIN THAT WE PUT THE WHITE PAPER OUT JUST A FEW DAYS AGO AND THEY - USUALLY WE WOULD GIVE THE COMPANY A PREVIEW OF IT. WELL FROM THAT DATE IN MID-MAY WE ASKED TO MEET WITH ALL OF THE DIRECTORS IN TOTAL, TOGETHER, IN GROUPS. WE WERE WILLING TO TRAVEL ALL OVER THE PLACE. MAY, JUNE, JULY, AUGUST. WE MET WITH JIM MCNERNEY, WE MET WITH DAVID TAYLOR, WE WENT TO KEN CHENAULT'S OFFICE ONCE AND WE SPOKE TO ANGELA BRALY ON THE PHONE.

FABER: RIGHT.

PELTZ: THAT WAS IT. OK. SO—

EISEN: WHY DO YOU THINK THAT IS? WHY DO YOU THINK THE COMPANY IS SPENDING SO MUCH TIME AND MONEY AND RESOURCES TO FIGHT YOU FOR THIS BOARD SEAT?

PELTZ: YOU KNOW, THAT'S A VERY GOOD QUESTION SARA. THEY'RE MAKING IT SOUND LIKE ITS ME VERSES THE BOARD. IN REALITY IT WAS ME COMING ON THE BOARD WITH ONE SEAT, OKAY? BECAUSE WE'VE SAID THAT THE MAN OR WOMAN THAT I WOULD BEAT TO GET MY BOARD SEAT, MY FIRST ACTION ON THAT BOARD WAS TO RENOMINATE THEM IMMEDIATELY SO WE'RE NOT EVEN GOING TO KNOCK ANYBODY OFF THE BOARD. SO HOW CAN I DO ALL OF THESE HORRIBLE THINGS THAT THEY'RE CONCERNED ABOUT IF I'M JUST ONE OUT OF TWELVE VOTES? MY VOICE MIGHT HAVE MORE FORCE THAN I – GO AHEAD.

FABER: YOU KNOW THEY TALKED ABOUT BOARD CONTINUITY. I KNOW THEY'VE TALKED ABOUT BOARD CONTINUITY. LISTEN IT'S A STRONG ARGUMENT TO A CERTAIN EXTENT, THIS IDEA OF WHY NOT. AND I THINK THERE ARE PLENTY OF INVESTORS THAT WILL AGREE. THAT SAID, THE ARGUMENT THAT YOU SEEM TO BE MAKING, THEY'RE REBUTTAL IS "YOU'RE FOCUSED ON THE PAST, YOU'RE DEALING WITH THE PAST AND IN FACT, YOU WANT TO MEASURE US IN WAYS THAT ARE NOT FAIR." WHEN IT CAME TO DUPONT FOR EXAMPLE AND YOUR BATTLE THERE YOU ACTUALLY SAID WELL IT HAS TO BE MEASURED ON THE TENURE OF ELLEN COLEMAN. THAT BEING TOTAL SHAREHOLDER RETURN AND THINGS LIKE THAT. PROCTER & GAMBLE WOULD SAY WHY ARENT YOU MEASURING US ON THE TENURE OF MR. TAYLOR AS OPPOSED TO GOING BACK AS FAR AS YOU ARE? IS THAT A FAIR CRITICISM?

PELTZ: NO. THE STOCK IS DOWN, WAS DOWN THE YEAR BEFORE DAVID TOOK OVER AT 31% AND LOSING MARKET SHARE. SO YOU KNOW, THAT'S NOT – AND SO. WITHIN MONTHS BEFORE DAVID TOOK OVER THE STOCK WAS BASICALLY WERE IT IS NOW. IT WAS IN THE 90s. SO THAT'S JUST NOT FAIR. BUT IF YOU LOOK AT ONE OF THE SLIDES WE SENT YOU, SLIDE NUMBER 4 WHICH HAS EVERY BOARD MEMBER, THEIR TENURE AND THEIR PSR VERSUS THE PEERS. THERE ISN'T ONE POSITIVE NUMBER EXCEPT FOR MRS. CHANG WHO JUST GOT OUT IN THE LAST COUPLE OF MONTHS. EVERYONE DEPENDING UPON LENGTH OF TENURE, EVERY ONE BRACKETED NUMBER IS BIGGER AND BIGGER AND IT'S UNDER EVERY ONE OF THEM? SO WHAT HAVE THESE GUYS DONE SINCE THEY CAME ON THE BOARD? AND I'VE BEEN TOLD THERE IS A HURDLE. IN ORDER TO GET ON THE BOARD, YOU'VE GOT TO COME ON WITH A NEW IDEA. OK, THAT SEEMS TO BE THE HURDLE. I HAVE A NEW IDEA, I HAVE A NEW IDEA WHICH SAYS WE HAVE A TINY HOLDING COMPANY. AND ALL OF THE ACTIVITY TAKES PLACE IN THE THREE GBUs. AND UNDER THOSE GBU HEADS, IT'S REGIONS AND GEOGRAPHIES AND COUNTRIES THAT REPORT IN AND THAT'S WHERE THE ACTION IS TODAY AND THAT'S WHERE YOU NEED FAST DECISION MAKING AND THAT'S NOT HAPPENING. AND YOU LOOK AT WHATS GOING ON TODAY AT GILLETTE THEY HAVE LOST 10% OF THE MARKET IN GILLETTE. THEY SPENT 50,000 BILLION DOLLARS IN 2005 TO BUY GILLETTE. TWO YEARS LATER, YOU ARE HARD PRESSED TO FIND ANYONE FROM GILLETTE IN THE COMPANY. GILLETTE HAD A HISTORY OF EVERY 8 YEARS, THEY WOULD OBSOLETE THE PRIOR PRODUCT LAUNCH. WHETHER ITS SENSOR, MOCK OR WHATEVER THE FUSION WHATEVER THEY WERE, THEY OBSOLETE IT AND COME OUT WITH A WHOLE NEW LINE. THEY DID THAT EVERY 8 YEARS. YOU TELL ME WHAT IT'S BEEN ALMOST 13 YEARS AND THERES NO NEW PRODUCT THAT WE HAVE SEEN COMING FROM GILLETTE AND THE ONLY THING WE'VE ONLY SEEN 10% CONTENT LOSS. NOW WE'VE BEEN CONTACTED.

EISEN: THEY'RE STRUGGLING.

PELTZ: AND IN THESE BATTLES, SARA AND DAVID, WE'RE ALWAYS CONACTED BY FORMER EMPLOYEES, RETIREES. IN THIS CASE, WE HAVE BEEN CONTACTED BY MULTIPLE, OF ANYONE WE EVER MET IN ANY OTHER BATTLES WE'VE HAD, MULTIPLES MORE. BECAUSE, AND THEY'RE VERY INTELLIGENT PEOPLE AND THEY'RE WELL SPOKEN AND THEY HAVE WRITTEN US BEAUTIFUL MEMOS ON WHAT NEEDS TO BE DONE. WE HAVE CHOSEN TO WORK WITH CLAY DALY, WHO LEFT AS VICE CHARIMAN AND CFO AND A HIGHLY RESPECTED GUY CONCERNED, WHO REALLY IS CONCERNED ABOUT THE RETIREES.

EISEN: NELSON. WE'RE ALMOST OUT OF TIME – WE'RE UP AGAINST THE CLOCK AND YOU HAVE MEETINGS TO. SO FINAL QUESTION - WHAT ARE YOU HEARING FROM INVESTORS ABOUT HOW THIS VOTE IS GOING TO GO AND WHAT ARE YOU GOING TO DO IF YOU LOSE?

PELTZ: FIRST OF ALL, I DON'T EVEN KNOW HOW TO SPELL LOSE. OK? SO I'M NOT GOING TO DISCUSS THAT. BECAUSE AS DAVID BROUGHT UP IN DUPONT, THAT WASN'T A LOSS THAT WAS JUST A SET BACK. AND LOOK WHAT HAPPENED THEN.

FABER: WELL YOU DID LOSE THE PROXY NIGHT, NELSON. YOU WON THE WAR, WITHOUT A DOUBT. YOU LOST THE PROXY FIGHT.

PELTZ: EXACTLY. THANK YOU.

EISEN: SO WHAT DOES THAT MEAN IN THIS CASE?

PELTZ: WHAT WE ARE HEARING FROM ALL OF THE SHAREHOLDERS IS, "THANK YOU FOR GETTING INVOLVED."

EISEN: ALL RIGHT. WE'LL SEE. WE'LL SEE WHICH WAY THEY VOTE. NELSON, THANK YOU FOR CALLING IN WELL LET YOU GET BACK TO YOUR MEETINGS FOR MAKING YOUR CASE FOR MAKING THAT CASE TO JOIN THE BOARD OF P&G. NELSON PELTZ, TRIAN CEO AND FOUNDING PARTNER.

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