Trian, the $13 billion activist hedge fund run by Nelson Peltz, on Monday unveiled a roughly $2.5 billion investment in General Electric.
"We invested in GE because it is undervalued and underappreciated by the market despite what we believe is a transformation that will allow its world-class industrial businesses to drive attractive shareowner returns, "Nelson Peltz, CEO and a founding partner of Trian, said in a statement. "Our recent discussions with Jeff and his team have solidified our belief that they are highly motivated to fully deliver on GE's transformation and share much common ground with Trian on ways to improve long-term shareowner value."
The GE investment is the largest in Trian's history, but unlike many of the fund's more combative positions, the stake in GE and Trian's approach towards it is being described as supportive of current management.
Trian, which has been in active discussions with GE's chief executive Jeffrey Immelt, has not asked the company for a board seat and has made it clear it supports the current strategy being pursued by Immelt.
That strategy has focused GE as an industrial infrastructure company that will derive more than 90 percent of its earnings from those businesses once the divestment of GE Capital is completed in the next two years.
Trian believes GE's share price does not reflect the drastic change in its profile or the consistent earnings growth that change will bring.
Ed Garden, Trian's chief investment officer and a founding partner, said in a statement: "Trian believes GE has significant long-term potential and that its implied target value per share, including dividends,could be $40 to $45 by the end of 2017 based on our view that GE can deliver EPS of at least $2.20 in 2018."