Trian Fund Management has grabbed a big stake in Ferguson
Trian Fund Management, the activist US investor founded by Nelson Peltz, has grabbed a big stake in plumbing supplier Ferguson (FERG), sending its shares 6% higher.
Trian Investors 1 (TF1), a Guernsey-based but London-listed investment company launched last September, is spearheading the venture with a £250 million ($317 million) investment.
Other Trian funds run by the New York-based partnership are co-investing to take the total position to £736 million ($935 million) or 6% of the company formerly known as Wolseley.
Shares in Ferguson jumped 324p to £56.34, making it the FTSE 100’s biggest riser and lifting its market valuation to around £12.5 billion as investors anticipated a turnaround in their fortunes.
Ferguson does most of its business in the US and the stock has dropped from £65 nine months ago over concerns about the slowdown in the economy.
On Monday the company announced a $500 million (£394 million) share buyback after its third quarter sales missed targets. It generates over 80% of its revenues in the US with the remainder from Canada and the UK.
In a statement Trian Investors 1 said that Trian believes that Ferguson is an attractive business that trades at a discount to comparable US peers. Trian has contacted members of Ferguson’s management team and looks forward to working with them to explore and implement initiatives that it believes can create long-term shareholder value.
It did not specify what initiatives it was proposing but disclosed the average price it paid for the Ferguson shares was £52.85. The investment uses 92% of the money it raised in its flotation in September. It expects to use a currency hedge to offset some of the US dollar exposure gained through Ferguson.
Analysts at Jefferies calculate Ferguson trades 20-25% below the value of its US rivals.
The stake makes Trian the second biggest investor in Ferguson, ahead of fund manager Fidelity, which owns 5.3%, but behind BlackRock on 10.5%, according to Refinitiv data.
Peltz and business partner Peter May made their names in the 1980s with the turnaround and expansion of Triangle Industries. In the following decade they bought soft drinks maker Snapple from Quaker Oats, revived its business and sold it to Cadbury Schweppes in 2000.
Five years later they founded Trian with Ed Garden where the trio went on to undertake high profile investments with PepsiCo and General Electric, and more recently an unsuccessful campaign at Procter & Gamble. They don’t regard themselves as activists, describing their activities as ‘engaged’ shareholders.