Peltz made the investment through his Trian Fund Management LP, which now becomes one of the top 10 shareholders in GE with the fund’s biggest investment ever.
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But Trian said it would not seek a board seat, backing the “transformation” already under way at GE. GE is the third largest company to be targeted by an activist investor, following Apple and Microsoft, according to the Journal.
Credit Suisse said the Trian stake could increase pressure on GE to push ahead with its makeover in “both scale and urgency”, resulting in accelerated cost-cutting and potential spin-offs or sales of underperforming assets in health care, energy management and other businesses.
On Monday, GE sold its corporate aircraft financing unit to Global Jet Capital.
Trian noted that its principals Nelson Peltz and Ed Garden have a longstanding relationship with GE’s CEO Jeffrey Immelt. Trian also said it would like the company to cut costs, explore more share buybacks and be more disciplined in its acquisitions.
In other words: Peltz is saying that GE should just keep doing what it’s doing, and the market will eventually see the value in this.
Nelson Peltz, chief executive officer and a founding partner of Trian, said, “We invested in GE because it is undervalued and under appreciated by the market despite what we believe is a transformation that will allow its world-class industrial businesses to drive attractive shareowner returns”.
Trian said GE’s dependence on its finance arm had hurt its total shareholder return, which had significantly trailed the S&P 500 index and industrial peers over the past decade.
In the second-quarter earnings announcement, GE raised its full-year Industrial operating earnings per share guidance to $1.13-1.20 and is on track for that goal, he added.
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In a separate statement, GE said it welcomes Trian’s significant investment in the company and looked forward to a constructive ongoing dialogue with Trian while it executes a strategy to reshape the company. But Wall Street was already expecting this – Barclays, for example, already expected GE to fetch $33 a share by next year – or about 22% more than it is trading at Monday.
