BREAKINGVIEWS-Lazard's new investor isn't passive by nature
(Refiles to clarify reference to Evercore vote in third paragraph.) (The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
NEW YORK, June 19 (Reuters Breakingviews) - Ken Jacobs finds himself in a rare and enviable position. Lazard’s (LAZ.N) chief executive now has Nelson Peltz’s Trian Partners as his second-largest shareholder. The activist investor reckons the $3 billion Wall Street advisory firm is undervalued and could be worth double in a couple of years - a similar conclusion to one Breakingviews reached in April (See: Lazard Groupon [ID:nL2E8FR31F]). But P eltz isn’t resorting to his usual tactics of demanding a special dividend, a breakup or a change in management to get there. Instead, he says his 5.1 percent stake is a bet on current managers and their plan.
That must really grind the gears of executives and boards from Heinz to Wendy’s [WEN.UL] and State Street (STT.N) to Kraft KFT.N who have been the subject of Peltz’s public protestations over the years. And in 2012’s so-called shareholder spring, Jacobs must be taking heart that he has managed to win over one of the uppity investor brigade’s most exacting practitioners.
Lazard has not completely escaped irate shareholders. The firm’s executive compensation plan won over just 50.6 percent of the votes at the annual meeting at the end of April, though that bested the rejection that met rival Evercore’s (EVR.N) plan to amend its stock compensation program. That same week, after discussions with major investors, Jacobs unveiled in his letter to shareholders a great deal more information about the company and his plan to boost shareholder returns.
That seemed aimed at combating investors’ tendency to lump Lazard in with more complex financial institutions exposed to economic woes and regulatory changes. It also highlighted the importance of the asset-management business at the Wall Street firm. It now accounts for almost half of revenue – along with its better known M&A business - and, as Trian points out, as much as 85 percent of last year’s earnings before interest and taxes.
For now, Trian’s stamp of approval serves as a handy fillip to Jacobs’ attempts to extract the most value from the firm for the benefit of its owners. But Peltz is not, by nature, a passive investor. If he thinks Jacobs is slipping up or even dragging his heels, he’s likely to pounce.
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- Trian revealed that it owned 5.1 percent of Lazard at the end of March, making the investment firm Lazard’s second-largest shareholder, based on Reuters data. Trian, which is run by activist shareholder Nelson Peltz, also issued an analysis of Lazard which supports Chief Executive Ken Jacobs’ plans for the advisory and asset-management firm, concluding that the stock could double from the $23.09 a share it traded at on June 15.
- Trian announcement and analysis: link.reuters.com/bad88s
- Reuters: Peltz's Trian builds 5.1 pct stake in Lazard [ID:nL1E8HIHHE]
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