Follow the fast-moving trian

September 24, 2015 09:00 AM

Trian Partners is a multi-billion dollar asset management firm founded in 2005 by Nelson Peltz, Peter May and Edward Garden. Since its inception, Trian has solidified its place as an activist investor to watch. Its six positions disclosed in 13D filings with the Securities and Exchange Commission (SEC) since July 2010 have averaged returns of 171%, compared to 108% for the S&P 500.  Those six investments: Domino’s Pizza (DPZ), Wendy’s (WEN), Ingersoll-Rand (IR), Allegion PLC (ALLE), E. I. du Pont de Nemours and Company (DD) and Family Dollar (FDO).  Trian’s executives play an activist role after investing in companies, often holding board seats and working directly with management on initiatives such as corporate restructuring or mergers.

A recent example of this was when Ed Gardner joined the Family Dollar board in 2012 and played a pivotal role in the $8.5 billion merger of Family Dollar with Dollar Tree. The preceding takeover battle lasted six months, involved competing bids from Dollar Tree and Dollar General and drew in many of the world’s leading activist investors, including Carl Icahn and Elliott Associates. 

Even before founding Trian, Peltz and May already had a very successful history of working with corporate boards to turn around underperforming companies. One of their big successes involved Triarc Beverages. As executives at Triarc, they shepherded the sale of the company’s Snapple division to Cadbury Schweppes (CSG) for more than $1 billion in October of 2000.  Triarc had bought the struggling brand from the Quaker Oats Co. for $300 million just three years earlier.

Trian aims to generate significant capital appreciation via its operations-centric investment strategy, according to its website. That strategy is to invest in public companies that have attractive business models but trade significantly below their potential value because of operational underperformance. Trian believes its core competency is to optimize its portfolio companies’ profitability by working constructively with management and directors in executing its own operational and strategic initiatives.

On June 30, Trian disclosed that it has built a 7.24% stake in Pentair PLC (PNR), a global manufacturer of pumps, valves and filtration equipment. The initial disclosure prompted the stock to jump more than 6%.  

According to the group’s SEC disclosure, they made the investment because they believed that the shares “were undervalued in the marketplace and represented an attractive investment opportunity.”  Trian then urged Pentair to improve its profit margins, generate organic revenue growth and adopt an incentive pay program for management. Trian officials are also asking Pentair to consider buying up rivals in an effort to consolidate the fragmented market for the specialized parts. They expect to continue constructive discussions with Pentair’s executives about the direction of the company. Trian “may also seek board representation,” the filing said.

Will Pentair be the next big success for Trian?

About the Author

Brent Plunkett is the co-owner of and CEO of Charter Wealth Management.  WhaleWisdom helps investors research and replicate the portfolios of top hedge funds through their publicly available SEC disclosures providing access and tools to invest like a Wall Street money manager at a Main Street price.