Nelson Peltz, one of the most prominent investors on Wall Street
New York - AFP
General Electric shares soared Monday on news that activist Nelson Peltz's fund Trian acquired a stake in the industrial conglomerate.
Near 1835 GMT, GE led the Dow index with a gain of 6.5 percent at $27.13, in a Wall Street market trading solidly higher.
Peltz, one of the most prominent investors on Wall Street, announced that Trian Fund Management had purchased 98.5 million GE shares, or one percent of shares valued at about $2.5 billion. GE is now Trian's largest investment.
"We invested in GE because it is undervalued and underappreciated by the market despite what we believe is a transformation that will allow its world-class industrial businesses to drive attractive shareowner returns," Peltz said.
Trian praised GE's efforts to pare its financial services business to focus on core industrial strengths as a "bold transformation" of the company and said that GE should explore share repurchases beyond current plans.
GE chief executive Jeff Immelt welcomed Trian's involvement and said he looked forward to "a constructive ongoing dialogue with Trian."
"GE is focused on improving margins and returns, reducing costs and the size of corporate, returning capital to shareholders and realigning our portfolio," Immelt said.
Credit Suisse said the Trian stake could increase pressure on GE to push ahead with its makeover in "both scale and urgency," resulting in accelerated cost-cutting and potential spin-offs or sales of underperforming assets in health care, energy management and other businesses.
But Deutsche Bank labeled the Trian involvement as a "potential activist red herring" because Peltz said he was not seeking a board seat, as he has in other cases.
The Trian investment comes as GE pursues a major corporate overhaul to divest most holdings of GE Capital and refocus on high-value industrial businesses, such as building aircraft engines, gas turbines and other industrial goods.
In the latest transaction, GE announced Monday that it had reached a deal to sell its fixed-wing Corporate Aircraft financing portfolio to Global Jet Capital. The deal involves $2.5 billion in net investment, taking sales of GE Capital Assets to about $97 billion in the year to date.