Nelson Peltz’s Trian Partners Takes Lazard Stake

Nelson Peltz’s Trian Partners Tuesday said it has taken a 5.1 percent stake in Lazard, the venerable investment bank.

Trian made the disclosure in an amended 13F filing, detailing holdings as of March 31. The deadline for filing the 13F was May 15 but many firms — especially hedge funds — frequently ask for and receive permission to delay the filing so they can finish buying the stock before going public with the holding.

“We are always looking for value at Trian,” Peltz said in an interview Tuesday morning on CNBC. “We love great brands and great franchises. This clearly meets those criteria.”

He pointed out that Lazard is well over 150 years old — its origins actually date back to 1848 when the Lazard brothers formed Lazard Frères & Co. as a dry goods business in New Orleans — and is the largest independent advisory firm out there. 

These days advice for mergers and acquisitions and other corporate matters constitutes half of operating revenue. Asset management — it managed about $157 billion at March 31 — contributes 48 percent of revenue.

“You’ve got a free call on one of the best advisory businesses in the world,” Peltz told CNBC.

Before the stock jumped more than 5 percent on the news, it was trading near the bottom of its 52-week range and close to its all-time low since going public in 2005. At close of business today, it was at $25.86, up 6.64 percent.

Citi Investment Research & Analysis on June 10 cut its price target to $26 from $30 and maintained a Hold rating after reporting a recent meeting with top company executives. “The tone was clearly cautious given lower equity markets, rolling crises in Europe, upcoming U.S. elections and year-end fiscal cliff issues that have not helped CEO confidence,” the investment bank told clients in a note.

Interestingly, at the same time, Citi reported that management emphasized plans to return capital to shareholders, with top priorities being buybacks, high-cost debt retirement where possible, dividends, and seed capital for asset management strategies. Perhaps Lazard knew — or sensed — an activist investor was aggressively accumulating its shares.

In fact, Citi conceded the stock seems cheap at 15 times its “conservative and somewhat depressed 2013 estimate.”

Standard and Poor’s, which has a Buy rating and a $32 price target, is more upbeat than Citi. It sees Lazard’s M&A business picking up in the second half although it expects flat to modest growth in asset management.

“We believe LAZ’s core investment banking business is beginning to improve, with potential acceleration in the second half of 2012, as corporate activities related to M&A and restructurings expand,” it told clients in a report dated June 16. “We view favorably the increasing focus of LAZ’s investment banking franchise on geographical expansion, especially in emerging markets, and industry-specific opportunities, but Europe may be a drag.”

Trian, which managed $3.7 billion at the end of the first quarter, mostly in three hedge funds, was founded in November 2005 by Nelson Peltz, Peter May and Ed Garden. Peltz and May are long-time activist investors who first made a name for themselves in the 1980s when they built Triangle Industries into a Fortune 100 company, before selling it to Pechiney in 1988.

They have traditionally emphasized investing in a small number of major consumer brands. They also frequently try to influence management by securing seats on the board of directors of the companies in which they invest.