Nelson Peltz is one of the most successful activist investors in the financial world. He is the co-founder of Trian Fund Management. L.P. along with Peter May and Edward Garden.
Peltz was born in 1942 in Brooklyn, New York. He went to school at the University of Pennsylvania's Wharton School of Business but dropped out in 1963. For $100 a week, he started driving delivery trucks for his father’s frozen food business where he grew the $2.5 million private business into a public company with $140 million in revenue in little more than a decade.
Junk Bond Mania
Nelson Peltz took advantage of the acquisitional value of high yield (junk) bonds sold by Michael Milken in the 1980s. By doing leveraged buyouts financed with these junk bonds, he turned his modest income into a multi-million dollar fortune. In 1983, Nelson Peltz acquired an interest in Triangle Industries which was then valued at an estimated $80 million. By 1988, Triangle Industries was valued at approximately $4 billion and was sold to state-owned French conglomerate Pechiney SA. Triangle`s stock leaped from $10.37 a share to $46.25 after the sale deal was announced publicly.
Peltz, through the use of junk bonds, bought out National Can Corporation in 1985 for $460 million and the packaging division of American Can Company in 1986 for $570 million. Both can companies were merged to form American National Can Corp which became the world’s largest packaging company.
Losses and Recovery
In 1989, Peltz bought out a British property developer, Mountleigh Group PLC, for $150 million. His plan to turn the company into a takeover vehicle for European companies didn’t pan out as intended with the real estate market crash of 1991 in Britain. Mountleigh went into bankruptcy having incurred $950 million in debt. Peltz lost all his investment in the aftermath.
In 1993, Peltz purchased an interest in Triarc Companies, Inc., a financially distressed holding company valued at approximately $700 million. In 1997, he made a major acquisition of Snapple from Quaker Oats for $300 million, successfully turned the company around, and sold the beverage company three years later to Cadbury’s Schweppes for more $1.45 billion in cash and debt.
Trian Fund Management and Activism
In 2005, he co-founded Trian Fund Management, an alternate investment firm, and has made investments in companies such as Wendy’s, BNY Mellon, Ingersoll rand, Legg Mason Inc., Heinz, Kraft Foods, Family Dollar, Tiffany & Co., and Domino’s Pizza, in some cases using leveraged buyout techniques. Trian Fund Management now oversees more than $10 billion of assets under management (AUM), as of Feb. 2019. As a corporate raider, Nelson Peltz seeks to build value by improving the operations of the target firm. He conducts his buyouts and acquisitions in the public traded markets where ordinary shareholders can benefit from positive turnouts in revised operations.
Peltz lost a vote to secure a board seat at consumer giant Proctor & Gamble (PG), nearly three months after he made a bid for it. On July 17, 2017, Trian had filed a preliminary proxy report with the Securities Exchange Commission (SEC) for the election of Nelson Peltz to PG's board of directors. This announcement came after the fund had increased its stake in the firm to $3.3 billion of shares. Peltz mentioned a lagging stock price as the reason for attempting to shake up the company. Given that P&G is Trian’s largest position in the fund, comprising of about a third of Trian’s portfolio, it made sense that Peltz would want the company’s share price to do better. In fact, from 2013 to October 2017, P&G had only traded between $70 and $93, and during this period had a high of $93.89 at the end of 2014. From the beginning of 2015 to October 2017, the stock has lost 1.4%.
P&G was not the first behemoth that Peltz went for. In 2013, he once vied for a board seat at food and beverage giant Pepsico, which he wanted broken up by spinning off its beverage unit from the better performing snacks division. After nearly two years of battling it out, Pepsico elected Trian advisor, William R. Johnson, to its board. Although the company did not implement the spin off, it implemented a strategic plan that saw its stock price rise sharply in the three years following Trian’s disclosure of its stake in the company. In 2016, when Peltz sold his nearly $2 billion stake in Pepsico, he walked away with a 50% return on his investment.
Nelson Peltz Legacy
In March 2017, Forbes listed Nelson Peltz as one of the 25 Highest-Earning hedge fund managers in 2016. The hedge fund, Trian Partners Master Fund, managed by Trian Fund, returned 11% net of fees in 2016 according to Forbes.
Peltz’s net worth as of September 2020 is over $1.7 billion.
Peltz is married to Claudia Heffner and has 10 children. He and his wife founded the Nelson & Claudia Peltz Family Foundation in 2003.