Activist In Agony: Nelson Peltz's Twin Challenges

The famed activist investor thought his Trian hedge fund could work its magic on a pair of troubled stalwarts, General Electric and Procter & Gamble. They proved to be two bridges too far.

- Geoff Colvin

ON OCT. 1, when General Electric announced it had fired John Flannery, its CEO of just 14 months, one of the few people not at all shocked by the news was Nelson Peltz, the legendary activist investor. Flannery’s abrupt dismissal surprised even Wall Street analysts who obsessively follow the tarnished conglomerate. Yet Peltz wasn’t caught off guard, because his partner at the Trian hedge fund, Edward Garden, is on the GE board of directors that did the deed. Trian owns 71 million shares of GE stock, qualifying GE as Peltz’s most disastrous investment in a long, successful career. He’s down over $1 billion, about 50%, since buying in three years ago, with the stock’s latest drop following word of a federal criminal investigation into recently disclosed liabilities. With the brutally swift cashiering of Flannery, Peltz now understood change was afoot.

More than most, Peltz is comfortable with dramatic change. No other activist, a class of investors not content merely to watch from the sidelines, has prompted more of it. Among many activist forays, he instigated the transformation of DuPont into three independent companies after first combining with Dow Chemical. He forced the separation of Kraft into Kraft Foods Group and Mondelez International. He tried and failed to break up PepsiCo. He thinks big.