Activist firm Trian takes $2.5 billion stake in General E

It amounts to the biggest investment ever for the investment firm, which has a history of pushing well-known companies to dramatically reshape themselves.

General Electric Co. has drawn a big investment from activist shareholder Nelson Peltz, adding urgency to the industrial conglomerate’s effort to revive its long-depressed stock price.

Peltz’s Trian Fund Management LP said it has accumulated $2.5 billion in GE shares since the middle of May —a roughly 1% stake —making it one of the company’s top 10 shareholders. It amounts to the biggest investment ever for the investment firm, which has a history of pushing well-known companies to dramatically reshape themselves.

Peltz and GE Chief Executive Jeffrey Immelt have a long relationship. While Trian has some criticism of the company, both sides say they are in agreement on most aspects of GE’s current direction, which includes the sale of the majority of its giant financing arm. Trian hasn’t requested a GE board seat.

The investment nevertheless puts additional pressure on Immelt, more than 14 years into his tenure as CEO, to light a fire under GE’s sputtering stock. The company’s shares closed Friday at $25.47, down more than 35% since the day in September 2001 when Immelt took over. The S&P 500 is up slightly more than 79% in the same period.

In a “white paper” Trian said it would disclose publicly Monday, the firm calls for the company to steepen cost reductions, consider getting rid of even more of the finance arm and be more cautious on acquisitions. It says the company could take on $20 billion in debt and repurchase shares. In the paper, a copy of which was reviewed by The Wall Street Journal, Trian bemoaned what it calls a “lost decade” for the company’s shares.

And yet its GE bet isn’t the typical activist investment—in which a fund takes a stake and pushes aggressively for change. The accord Trian has found with GE’s management is one of the biggest signs yet the industry is deciding friendlier nudges can work better than public brawls.

Trian executives began briefing GE officials on their views starting in May, at the beginning of the fund’s share-buying binge. GE has in recent months indicated it would make a number of moves. On Sunday, both Mr. Immelt and Chief Financial Officer Jeffrey Bornstein said that they largely agree with Trian’s prescription.

“We are completely aligned on the levers that get us from point A to point B,” Bornstein said in an interview.]

Source:Marketwatch