Activist investor Trian Fund Management has disclosed it has amassed a $2.5 billion stake in General Electric, becoming one of the largest shareholders in the conglomerate.
Nelson Peltz, CEO and a founding partner of Trian, said he was investing in GE because Trian believed the stock was “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 shareholder returns.”
He has a point. Over the past decade, GE’s (GE) shares have slipped 24% vs. a 59% gain for the S&P 500 index. Though net earnings in recent years have continued to climb, revenue for 2014 totaled $148.6 billion, down slightly from $148.9 billion in 2010.
Peltz said Trian, which had informal talks with GE’s management team as far back as 2013, had more recently met with leaders of various GE business units. Trian touted the company’s recent efforts to transform itself from a broad conglomerate, which includes a large regulated financial services business, to a company more narrowly focused on infrastructure projects.
Notably, Trian is not asking for board representation.
With the ownership of 98.5 million GE shares, Trian ranks as the fifth largest holder in the stock, according to Morningstar data, which compiles equity ownership of major funds.
In a separate statement, GE CEO Jeff Immelt said the company welcomed the investment, while also lauding GE’s efforts to improve margins, reduce costs and return capital to shareholders.
“I have known Trian Principals Nelson Peltz and Ed Garden for many years,” Immelt said in a statement. “We appreciate their perspectives and look forward to a constructive ongoing dialogue with Trian as we execute our strategy to reshape the company.”