Change at GE Likely to Head Off Fight With Trian

By David Benoit Features Dow Jones Newswires

In recent months, tension between General Electric Co. and activist investor Trian Fund Management LP had been gradually building as the industrial conglomerate's results and share price languished.

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Now, with the planned departure of GE's longtime chief executive officer, Jeff Immelt, the chance of a public clash soon is greatly diminished.

Investors sent the stock climbing 3.6% to $28.94 on the news Monday, adding nearly $9 billion in market value,as new leader John Flannery promised a broad review of the business "with a sense of urgency."

Mr. Flannery is described by analysts and others close to the company as an executive who is in sync with Trian's thinking: He has a record of hitting financial targets, he is likely to focus on cash management, and he is driven by metrics that activists champion such as return on spending and total stockholder returns.

But the Boston-based company didn't consult Trian on the move--GE said it was in the works for four years--one that could narrow Trian's options if it is still discontented.

One option that has been available to Trian was to fight for a board seat at GE's annual meeting next year. But other shareholders may be less likely to go along with such an effort as they give Mr. Flannery time to boost the stock and improve performance, making an already tough-to-win vote significantly more difficult.

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Trian has historically been loath to walk away from investments, and currently has no plans to do so in the case of GE, according to a person familiar with the matter. The fund is already up by at least $250 million since it disclosed the $2.5 billion bet in 2015, though the shares are still far below the $45 share price it targeted.

Even if it didn't force the CEO change, Trian will likely continue to wield influence. It could even find a new ear in Mr. Flannery's.

The activist and its co-founder and Chief Investment Officer Ed Garden had increased the pressure on Mr. Immelt this year. That led to an unusual disclosure in March in which GE said it had, in conjunction with Trian, pledged to lower annual spending by $2 billion in the next two years and tie executive bonuses to the effort.

But last month, Mr. Immelt raised concerns about GE's forecasts, increasing the odds Trian could push for a CEO change.

The chance for a public brawl was always smaller than in most activist situations in part because the relationship started friendly. Mr. Immelt had been looking for support as he shed GE's towering finance business. Trian originally said the stock wasn't well understood and applauded Mr. Immelt's transformation, though it suggested more cost cuts and disciplined spending were needed.

Write to David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

June 12, 2017 19:45 ET (23:45 GMT)