Peltz Takes 6.58 Percent Stake In Family Dollar

The purchase makes Nelson Peltz’s Trian Group the second largest holder in Family Dollar stock, behind hedge fund Maverick Capital.


Nelson Peltz has a new target.

The investor/hedge fund manager Wednesday said in a regulatory filing that his firm, The Trian Group, owns 6.58 percent of the shares of Family Dollar Stores. The stake is held by several of the firm’s hedge funds as well as individuals at the firm.

The purchase makes Trian the second largest holder in the stock, behind hedge fund Maverick Capital, as of filings reflecting holdings at the end of the March quarter.

Family Dollar’s stock surged nearly 6 percent on the news.

Trian said it bought shares and options in the discount retailer because it believes that the stock is undervalued and represents an attractive investment opportunity. Trian recently met with company chairman and CEO Howard R. Levine as well as members of senior management to discuss business and strategies “to enhance value,” stressing that there is an opportunity to improve the company’s operational performance.

Trian said it wants to work on a number of operating issues, such as boosting sales per square foot to levels of its competitors, improving operating leverage and assessing new store openings. It also said it discussed how the retailer could best take advantage of its capital structure and significant free-cash flow.

One possibility: Borrowing money to institute a large stock buyback — a favorite ploy among activist investors in general.

Peltz is best known for teaming up with Peter May to boost the value of Snapple, Heinz and Wendy’s/Arby’s Group, Trian’s largest holding at the end of the first quarter. They first made a name for themselves in the 1980s with their investment in Triangle Industries, thanks in large part to junk bonds underwritten by Mike Milken.

Second quarter equity holdings in general will not be known for more than two weeks.

However, as of March 31, other top Trian holdings included Tiffany, Legg Mason, Heinz and Kraft Foods.

As of the end of the first quarter, Trian also took new positions in Aeropostale, US Bancorp and JPMorgan Chase.

In the Family Dollar filing, Trian said it may take certain actions, including requesting or proposing one or more nominees to the Board of Directors and purchasing additional securities. He also may enter into financial instruments or other agreements that increase or decrease his firm’s economic exposure to its investment or hedge his position.

However, Peltz made it clear he does not have a specific plan or proposal for the stock or the company.