An investment fund belonging to one of the wealthiest activist investors in the US has secured a $2.5 billion stake in General Electric, bolstering the conglomerate's efforts to shed its finance operations.
Trian Fund Management, owned by activist investor Nelson Peltz, became one of General Electric's biggest shareholders on Monday after the firm purchased a $2.5- billion (2.24-billion-euro) stake in the industrial heavyweight.
GE shares jumped 4 percent to $26.48 after the buy-in was announced. Trian's involvement was seen as adding fresh pressure to GE to get back to its industrial roots and build more complex machines for other companies.
The company has been refocusing its trajectory for months. As the lingering effects of the financial crisis bite into GE's bottom line, the companyhas been seeking to ditch its financing arm
, GE Capital.
In April, GE said it would try and sell some $200 billion of GE Capital's assets, putting the company on target to earn 90 percent of its profits from industrial operations by 2018. In 2013, just over half of GE's profits came from industrial orders.
On Monday, GE sold its corporate aircraft financing unit to Global Jet Capital.
Peltz's firm said it would not seek a seat on GE's board, adding that it supported the company's efforts to further scale back GE Capital. Trian also said it would like the company to cut costs, explore more share buybacks and be more disciplined in its acquisitions.
Peltz, one of the biggest activist investors in the US, has about $12 billion in assets under management. Activist investors typically buy stock in undervalued companies and then push for improvements in their structure or management.
In GE, Peltz saw a company whose stock had risen only 10 percent over the past decade. By 2017, Peltz said, GE stock could be worth as much as $40 to $45 - a 51 to 70-percent increase over the stock's current value.
cjc/hg (AP, Reuters)