Nelson Peltz: In Boss Mode?
Barron’s put out a profile of notable activist investor Nelson Peltz on July 4th. Here’s a summary with a lot of our conjecture injected.
Peltz and his Trian Partners failed at DuPont, but they are still joyful. The big index funds took the 73-year old activist to the woodshed on the DuPont proxy vote. Yet, Peltz plans to hold his DuPont shares for the foreseeable future and may even consider another proxy battle.
The fund is, however, jacked about its new Pentair stake. It is also taking two new stakes in large companies (undisclosed), noting they have $3 billion in cash to deploy. For reference, its DuPont ($70B market cap or so) stake is right at $1.5 billion.
Peltz tries to bill himself as different than Icahn and Saul Steinberg of the 80s, saying he always looked for companies to own and operate, versus extorting companies greenmail style.
He founded Trian in ‘05 and had key successes with getting Kraft to split in ‘12. Really only major claim to fame, with some seriously underperforming campaigns (more on that below)
DuPont only second proxy fight ever for Train, last being Heinz in 2006 - effectively got a win at Heinz.
Peltz started out with running the frozen food company, Flagstaff - the Peltz family business that he had worked at since the 60s. It ended up in Chapter 11 in 1981.
In ‘83, Peltz bought into the vending machine company Triangle Industries. Ultimately using it to buy up several companies. Peltz cashed out in ‘88 after the company was bought out - raking in $900 million for him and his partner.
In ‘97, he was involved with Triac, which bought Snapple for $300 million from Quaker Oats. It sold Snapple for $1.45 billion, generating $450 million for him and his partner.
He started Trian Partners in 2005 and since then to May 2015, Trian has generated annual net returns of 9.7%, versus the S&P 500’s 8.3% return.
Our 13D analysis on Trian:
“Years of steady cash flow tend to dull companies’ entrepreneurial fire and focus on having best-in-class profit margins and revenue growth. Top-heavy corporate structures result, characterized by layer upon layer of bureaucracy anxious to justify their very existence. Accountability erodes as key decisions, such as where to spend research-and-development, capital expansion, marketing, and advertising dollars, devolve more and more from operating units to headquarters. Special constituencies and interest groups develop to subvert any attempt at zero-based, or what we at Trian call white-sheet, budgeting, in which every expense has to be justified as enhancing profitability and growth.” - Peltz