|
Geoff Colvin, Activist in Agony. Nelson Peltz's twin challenges: The famed activist investor thought his Trian hedge fund could work its magic on a pair of troubled stalwarts, General Electric and Proctor and Gamble. They proved to be two bridges too far. Fortune, December 2018.
http://fortune.com/2018/11/26/nelson-peltz-ge-pg-stock/
Quote:
(1) "On Oct 1, [2018,] when General Electric announced it had fired John Flannery, its CEO of just 14 months * * * Peltz wasn't caught off guard, because his partner [and 'son-in-law' who was 57] at the Trian hedge fund, Edward Garden, is on the GE board of directors that did the deed. Trian owns 71 million shares of GE stock, qualifying GE as Peltz's most disastrous investment in a long, successful career. He's down over $1 billion, about 50%, since buying in three years ago, with the stock's latest drop following word of a federal criminal investigation into recently disclosed liabilities. With the brutally swift cashiering of Flannery, Peltz now understood change was afoot. * * * No other activist [than Peltz], a class of investors not content merely to watch from the sidelines [this is definition of an activist investor], has prompted more of it. * * * P&G [Procter & Gamble] is no disaster [as GE is] * * * But the company [P&G] is nowhere near the success Peltz wants it to be, a year after he battled P&G in the most expensive proxy fight in US history and gained a board seat in March. P&G stock is a laggard, and Peltz’s stake, recently worth $3.5 billion, is by far the biggest investment in $10 billion Trian. * * * Together, GE and P&G have mauled Trian’s previously sterling record
(2) "In addition to bringing the activist's usual tools—breakups, cost cutting, borrowing—the firm is willing to delve more deeply into operations than any other activist and sometimes spends years helping management fix a business. * * * At age 76, Peltz traces his activist roots to the mid-'80s heyday of Michael Milken and the band of corporate raiders he financed. * * * Unlike many back then, Peltz wasn't interested in greenmail, the strategy of buying a stake, threatening management with a takeover that would cost them their jobs, and offering to go away if the company bought back the greenmailer's stock at a higher price. Instead, he saw a chance to make even more.
(3) He [Peltz] and his brother [Robert] built the family's food distribution business into an institutional frozen food company called Flagstaff [Corp, whose ownership under Peltz brothers: 1972-1978 (when the brothers sold it)]; to this day, Trian likes food companies and has invested in many—Wendy's, Kraft, Heinz, PepsiCo, and more. Flagstaff went bankrupt when Peltz was 40 [1982], but he apparently learned from the experience. He and Peter May, an accountant who had been Flagstaff's chief financial officer [some reports said 'accountant'], bought Triangle Industries, a vending machine and wire company that they built into a Fortune 100 industrial conglomerate, which they sold in 1988. He and May have been buying, fixing, and selling companies ever since. In 2005, they formed Trian with a third partner, Garden, a former Credit Suisse First Boston investment banker. Institutional investors like the California State Teachers' Retirement System [CalSTRS], which has backed Peltz in his proxy fights at DuPont and P&G, account for about 75% of Trian's assets, the firm says."
(4) "If that [Trian's business approach] sounds to you more like private equity, Trian agrees. 'We think of ourselves as a new asset class,' he said. ' "Liquid private equity" or "hybrid private equity." ' [These two names are not important; after all, these two are Trian's terms. What is important is distinction from PE (see next)] The objective is to earn PE [private equity]-scale returns without having to buy a whole company or a significant stake, as PE firms typically do; Trian owns only 1.5% of P&G and 0.8% of GE. By improving operations and holding positions for years, even without leverage ['Leverage results from using borrowed capital as a funding source': Investopedia], Trian hopes to generate higher returns and earn bigger performance fees than it could through trading alone.
(5) In 2015 "General Electric certainly met the spec of a great company that had gone off track, and as it happened, GE chief Jeff Immelt had invited Peltz to buy in. * * * Peltz bought $2.3 billion of GE stock * * * [That fall, Trian endorsed Immelt, including 'existing most of GE Capital'] The stock rose, and Peltz sold some, taking almost $400 million off the table, which in retrospect was a wise move. * * * Had Peltz been worried about GE, it seems unlikely he would have picked that moment to make another massive bet on a troubled titan. Just weeks earlier [the previous two paragraphs mention 'December 2016' and '2016's fourth quarter'], with his GE stake appreciating, Peltz bought his first tranche of Procter & Gamble stock. By early 2017, it was Trian's new largest investment, worth $3.3 billion. P&G no longer marketed food, Peltz's favorite business, but this was still his ideal target, a great company that had grown far too complex and needed shaking up. Dozens of its most famous brands—including Gillette razors, Crest toothpaste, and Pantene shampoo—were losing market share * * * Wall Street gladly greeted Peltz's arrival, but P&G's leaders did not. The company issued the obligatory statement about appreciating all its shareholders, but managers loathed the prospect of an outsider telling them how to do things. * * * P&G rejected Peltz's [June, 2017] request [for a board seat], so in July [2017] he announced a proxy fight. * * * in the end, P&G won a two-month shareholder vote by the nearly invisible margin of 50.01% to 49.99%. The directors realized the victory was too narrow to deny Peltz a seat, and he joined the board this past March. * * * GE investors and analysts recall the moment they realized Immelt was through [finished, done, over]. * * * From then until now, GE's news has gone from bad to worse. Its most dramatic response has been the radical restructuring of the board * * * one of the three new directors] was Larry Culp. Speculation followed instantly: Was he the CEO in waiting? And if so, was Trian behind it? The firm [Trian] won't comment, but it issued a fact sheet about itself last May that observed that at GE, 'three new directors joined the board including Larry Culp, former CEO of Danaher,' while omitting the names of the other two. Insiders say Culp disavowed any desire to be CEO—a sure sign the possibility existed. * * * Peltz's odyssey with GE and P&G outlines the limits of activism. As investors with non-controlling stakes, activists can’t run a company day-to-day, which means they’re always a couple of steps removed from solving the deep cultural problems afflicting many companies in an age of disruption. Influencing the choice of the CEO is about the best they can hope for. But the real transformation is in that person's hands, not in the activists'.
|
发表于 2-13-2019 14:23:30
收藏
分享
支持
反对
楼主