Company: Invesco Ltd. (IVZ)
Business: Independent investment management company. Invesco provides a range of investment capabilities and outcomes, which are delivered through a set of investment vehicles, to help clients achieve their investment objectives. Its Jemstep solution provides wealth management home offices and their advisors with a suite of technology solutions that are customizable and are integrated into existing systems. The solution offers advisors an open architecture platform that includes Invesco’s fundamental and factor-based investment strategies. It offers retail products within various asset classes. It offers a suite of domestic and global strategies, including traditional and quantitative equities, fixed income and absolute return strategies.
Stock Market Value: $6 billion ($13.11 per share)
Activist: Trian Fund Management
Percentage Ownership: 9.9%
Average Cost: $10.86
Activist Commentary: Trian has a history of activist investments in the financial sector, but outside of getting portfolio companies sold, their returns have not been impressive. They had a recent successful investment at Legg Mason when it was sold to Franklin Templeton less than a year after Trian’s Nelson Peltz and Ed Garden joined the Board, yielding a 39.5% return for Trian, versus 9.2% for the S&P 500. But they did not fare so well in their 2009 campaign at Legg Mason where Nelson Peltz was on the board for five years, yielding a 36.7% return on its investment during a period where the S&P 500 returned 82.8%. Likewise, in its current investment in Bank of New York, where Ed Garden was on the board for 4.5 years, they are down 8.8% versus a positive return of 72.5% for the S&P 500.
Trian has met and engaged in a constructive discussion with Martin Flanagan, a director and president and CEO of the company, and Allison Dukes, senior managing director and CFO of the company. Trian intends to engage in discussions with the Company regarding various strategic and operational initiatives. Trian noted that during the meeting with Mr. Flanagan and Ms. Dukes, it requested that the board be expanded to include Trian partners Nelson Peltz and Ed Garden and also discussed board refreshment. Trian believes that the asset management industry is undergoing significant change due to a variety of competitive pressures, and that industry participants that possess significant scale and product breadth, streamlined and efficient non-investment functions, and the ability to invest in technology, growth and innovation will be best positioned to succeed in the industry and serve clients going forward. Trian noted that it may encourage the company to explore, certain strategic combinations with one or more companies in the asset management industry (which may include companies in which Trian is currently a shareholder or may in the future become a shareholder). Further, Trian may seek to participate in any such strategic combinations and may initiate or participate in discussions with the board and/or management of the proposed or contemplated counterparties in such transactions.
Behind the Scenes
Trian filed two 13Ds on the same day, one on Invesco and one on Janus Henderson Group. In their 13D language on Janus, they state that they have had a conversation with Janus’s Non-Executive Chairman, Richard Gillingwater, and intends to engage in discussions with the board and/or management of the company regarding many topics including encouraging them to explore, certain strategic combinations with one or more companies in the asset management industry (which may include companies in which Trian is currently a shareholder). They further state that they may seek to participate in any such strategic combinations and may initiate or participate in discussions with the board of directors and/or management of the proposed or contemplated counterparties in such transactions. They have the same language in their Invesco 13D, but also add that they requested that the Invesco board be expanded to include Trian partners Nelson Peltz and Ed Garden.
This is a clear indication that they are encouraging Invesco to merge with Janus from both sides. They could also potentially be exploring a potential acquisition of either company for Bank of New York, where they have an investment, and until recently a board seat but that is less likely, as they have been in the process of selling down their position and may already be out of it entirely.
Depending on how this turns out, it will be viewed as either an experienced activist using creativity and all of its tools to fully maximize returns for its investors, or a strategic, short term activist engineering attempt to try to boost returns coming into the fourth quarter of a down year. Trian’s engagement with Janus does not really scream long term, thoughtful engagement. They acquired half their position in the last ten days and they did not contact the company until the day before their 13D filing.
Janus further said in a statement that they are executing upon their strategy of simple excellence – producing dependable investment outcomes, delivering industry-leading client experiences, increasing operational efficiency, fostering a proactive risk and control environment, and developing new growth initiatives; that they continue to make significant progress to increase profitability, drive organic growth, and identify and deliver cost savings, and are committed to delivering meaningful value for shareholders.
It is not uncommon for an activist to file a 13D on a company and urge the board to explore a sale, but rarely does an activist take a contemporaneous position in a potential acquirer and disclose its intent to discuss a potential transaction or participate in a transaction. While this could help pave the way for a transaction, it is also fraught with potential conflict with the activist having a material position in both the buyer and the seller.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.