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Activist Investor/Shareholder Nelson Peltz

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发表于 2-13-2019 14:23:30 | 显示全部楼层 |阅读模式
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'.
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 楼主| 发表于 2-13-2019 14:30:42 | 显示全部楼层
本帖最后由 choi 于 2-14-2019 14:14 编辑

Note:
(a) In my posting titled "Fortune (magazine)" dated Dec 10, 2018, item (2) was about the December 2018 issue of Fortune, where I brought up only Fortune's "Business Person of the Year" whose No 6 was Lisa Su. After my Feb 11, 2019 posting about Ron Joyce, I went back to the December 2018 issue of Fortune about Peltz.

(b) title and quotation 1:
(i) stalwart (adj and n; Did You Know?)
https://www.merriam-webster.com/dictionary/stalwart

serviceable
https://www.merriam-webster.com/dictionary/serviceable
(ii)
(A) The English surname Nelson means "son of Neil."  Neil is "a masculine given name of Gaelic origin. * * * an Anglicisation of the Irish Niall [pronounced the same as Neil or its variants: Neal, Neel, Neill] which is of disputed derivation." en.wikipedia.org for Neil.
(B) The German and Jewish (Ashkenazic) surname Peltz (and variants including Pelz) means "a furrier, from Middle High German bellez, German [noun masculine] Pelz fur."
(iii) cashier (etymologies differ for v and n)  
https://www.merriam-webster.com/dictionary/cashier
(iv) Procter & Gamble (1837- ; based in Cincinnati; "Candlemaker William Procter, born in England, and soapmaker James Gamble, born in Ireland, both emigrated from the United Kingdom. They settled in Cincinnati initially and met when they married sisters Olivia and Elizabeth Norris")  en.wikipedia.org for "Procter & Gamble."
(A) The English surname Proctor was an "occupational name from Middle English prok(e)tour steward [ultimately from] Latin (noun masculine) procurator agent, from (verb) procurare to manage."  

Another definition of Latin verb procurare is "to take care of, from pro- for + noun feminine cura care."
www.merriam-webster.com for procure.

The English verb procure is a descendant of procurare.
(B) The English surname Gamble is "from the Old Norse byname Gamall meaning 'old.' "

(c) About quotation 3.  "Peltz does his dealmaking through two related companies: Triarc and Trian. (The confusingly similar names derive from Triangle Industries, Peltz's first big acquisition.)"  Shawn Tully, The Reinvention of Nelson Peltz. Fortune, April 2007

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 楼主| 发表于 2-13-2019 14:32:23 | 显示全部楼层
(d) Regarding quotation 5.
(i) spec (n): "SPECIFICATION—usually used in plural   also : a single quantity (such as a dimension or a measure of performance) describing a product especially as part of a specification"
https://www.merriam-webster.com/dictionary/spec
(ii) "GE Capital is the financial services unit of * * * General Electric. It provides commercial lending and leasing, as well as a range of financial services for commercial aviation, energy, and support for GE's industrial business units."  en.wikipedia.org for "GE Capital."
(iii) "P&G no longer marketed food"
(A) list of Procter & Gamble brands
https://en.wikipedia.org/wiki/List_of_Procter_%26_Gamble_brands
(• Duncan Hines [name of the founder (1880 – 1959)] packaged cake mixes, sold to Aurora Foods (now Pinnacle Foods) in 1998
• Iams cat and dog foods now owned by Mars Corporation")
(B) Iams
https://en.wikipedia.org/wiki/Iams
("During the 1940s, because pet food was not available in stores, animals were predominantly fed homemade food, usually table scraps. Paul Iams, an animal nutritionist who graduated from Ohio State University in 1938, founded The Iams Company in 1946 in a small feed mill near Dayton. * * * By 1982, he [Clay Mathile; Clay is short for Clayton, a surname] became the sole owner and president * * * Mathile sold it to P&G [in 1999 and became a billionaire; in turn P&G sold it to Mars in 2014]")
(iv)
(A) "Shareholders may appeal to a company’s board of directors, if they’re dissatisfied with a specific management decision. But if board members refuse to listen, disgruntled shareholders may persuade others shareholders to let them use their proxy votes, in a campaign to replace unyielding board members with candidates more receptive to implementing the shareholders' proposed changes."  Investopedia for "proxy fight."
https://www.investopedia.com/terms/p/proxyfight.asp
(B) "A proxy vote is a ballot cast by one person or firm on behalf of a shareholder of a corporation who may not be able or have the desire to attend a shareholder meeting [in person; which is the main reason the shareholder appoints a proxy], or who otherwise desires not to vote on an issue. Shareholders receive a proxy ballot in the mail along with an information booklet called a proxy statement describing the issues to be voted on, such as electing directors to the board, approving a merger or acquisition, and approving a stock compensation plan."  Investopedia for "proxy vote."
https://www.investopedia.com/terms/p/proxy-vote.asp
(v) H Lawrence Culp Jr
https://en.wikipedia.org/wiki/H._Lawrence_Culp_Jr.
("is the current CEO and Chairman of the Board of General Electric, beginning on October 1, 2018. He is the first outsider to run GE in the company's 126-year history")

Apparently the Fortune article went to galley prior to Oct 1, 2018.
(vi) galley proof
https://en.wikipedia.org/wiki/Galley_proof
("Galley proofs or galleys are so named because in the days of hand-set letterpress printing in the 1650s, the printer would set the page into galleys, namely the metal trays into which type was laid and tightened into place.[5] A small proof press would then be used to print a limited number of copies for proofreading")
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