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Procter & Gamble's (PG) - Get Procter & Gamble Company Report estimates that it will spend about $35 million on its boardroom battle with activist investor Nelson Peltz, making the fight the most expensive of the year and one of the most costly director fights in decades.

"This is clearly the most expensive director battle of the year and the most expensive in recent years," said Thomas Ball, managing director at proxy solicitor Morrow Sodali.

Peltz, who is seeking one seat on the packaged goods company's board, estimates that his fund, Trian Fund Management, will spend $25 million to promote his effort to push the company into eliminating what he calls its "suffocating bureaucracy" by simplifying an existing matrixed organizational structure.

P&G, which is incorporated in Ohio, said it estimates that it will spend $35 million for the company's solicitation of proxies from shareholders in its defense, of which about $950,000 has already been spent. The costs include the hiring of two high-profile proxy solicitors, MacKenzie Partners Inc. and D.F. King & Co., which will be leading its institutional and retail shareholder engagement effort. Additional costs include mailing, handling and printing costs of document delivery, as well as legal fees for the drafting and filing of proxy material. Procter & Gamble did not return a request for comment.

Ball said that historically, companies and activists have underestimated the costs of director battles in their estimates, particularly if they involve litigation expenses that occur when both sides file countering lawsuits over various endeavors. It's unclear whether the cost also includes all the packaged goods company's advisers for the fight.

"I highly doubt that P&G's estimate involves costs of legal bills related to potential litigation," Ball said. "They typically underestimate the costs of the solicitations. As you get into the late stages of the proxy fight, things you didn't anticipate occur, such as doing a Federal Express mailing to all holders of over 100 shares."

Earlier this year Arconic Inc. (ARNC) - Get Arconic Corp. Report disclosed that it estimated that it would spend about $17.5 million on its proxy solicitation defense in response to a battle launched by insurgent Elliott Management Corp.'s Paul Singer. The effort ultimately led to the ouster of Arconic's CEO, Klaus Kleinfeld and the company also later agreed to install three dissident directors to its board. Elliott disclosed in March that it was likely to spend about $15 million on the solicitation and battle. Their efforts included sending out expensive mini video players complete with a four minute video explaining he activist's position to retail investors.

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The second largest proxy fight in recent years also involved Peltz. In 2015 he sought unsuccessfully to get on the board of DuPont Co. Peltz projected in March 2015 that Trian was going to spend $8 million "in connection with the solicitation" of proxies for its battle. DuPont said in a filing the same month that that it would spend $15.4 million, excluding potential litigation costs, related to soliciting proxies from shareholders in excess of what it normally spent for an annual meeting. 

However, Ball noted that historically, some high-profile proxy fights have been very expensive and may have surpassed costs P&G expects to incur. He added that some included costly print advertisements, which are not common today. Walter Hewlett's failed effort to block Hewlett-Packard Co.'s 2001 merger with Compaq cost him roughly $20 million. However, observers had suggested that the two companies, HP and Compaq, spent as much as $200 million on their side of the battle though a company spokeswoman at the time said the estimate was far too high. And Sam Wily spent more than $10 million in 2001 in his bitter governance feud with Computer Associates International Inc.

P&G has retained Weil Gotshal & Manges LLP and its partner Michael Aiello to advise it in response to the Peltz's effort, according to two people familiar with the situation. 

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