Nelson #Peltz Takes 5.1% Stake in #Lazard - NYTimes.com

Nelson Peltz Takes 5.1% Stake in Lazard

JUNE 18, 2012, 3:54 PM

By MICHAEL J. DE LA MERCED

Nelson Peltz's Trian Fund Management said on Monday that it now owns a 5.1 percent stake in Lazard, stressing that it believes the investment bank is undervalued but on the right track with its strategic plan.

The stake makes the investment firm one of Lazard's biggest shareholders. Trian said in a statement that it was encouraged by several meetings that it had held with the bank's management team. The investment firm began reaching out to Lazard executives in the first quarter, noting that it had begun buying up shares and wanted to begin discussions, according to a person briefed on the matter.

It also approved of a strategic plan unveiled in late April aimed at bolstering Lazard's operating margins by 25 percent over the next two years and improving shareholder value through dividends and share repurchases.

Trian's investment could help stage a rebound for Lazard's shares, which have tumbled this year along with the financial sector as a whole. While the firm's stock leaped more than 5 percent after the announcement, it remains down 7.7 percent for the year to date.

While Trian's team, led by Mr. Peltz, isn't a stranger to shareholder activism -- it has agitated for change at the likes of Family Dollar and State Street over the past year -- it has also sought to work with management on a friendlier basis.

The investment is part of a bet that Lazard will outperform other parts of the banking industry. Much of a 38-page presentation that Trian published on Monday focuses on the relative strengths of the firm, including a strong asset-management arm, a blue-chip franchise and a relative freedom from the regulatory requirements that weigh down on universal banks.

It is also a bet that Lazard will be able to continue improving its core business, advising companies on mergers, restructurings and other corporate developments. Trian writes in its presentation that while the investment bank is the biggest advisory firm around, it commands only a 9 percent share of the total deal fees pool. In other words, the investment firm believes there's room to grow.

And compared with other major independent merger advisers, namely Evercore Partners and Greenhill & Company, Lazard earns more revenue as a whole and has more clients paying more than $1 million in deal fees.

In its statement, Trian says that if Lazard can pull off its strategic plan, it could raise its earnings per share to over $3.50 by 2014, potentially doubling its current stock price.

Lazard said in a statement: "Trian Partners are experienced and successful investors, and we appreciate their confidence in Lazard's franchise and strategy."

Nelson Peltz Takes 5.1% Stake in Lazard - NYTimes.com