Trian Investors 1 invests in Ferguson – Trian Investors 1, which was set up to invest in a single stock and engage with stakeholders to improve the stock’s value, has finally made its move, acquiring a stake in Ferguson.
Funds managed by Trian Fund Management, L.P. and Trian Investors Management, LLC, including the fund through which Trian Investors 1 deploys its money, have bought a 5.98% interest in the shares of Ferguson plc (LSE: FERG.L) as of June 12, 2019, valued at approximately GBP 736 million (U.S. $935 million). Trian says that it believes that Ferguson is an attractive business that trades at a discount to comparable U.S. peers. Trian has contacted members of Ferguson’s management team and says that it looks forward to working with them to explore and implement initiatives that it believes can create long-term shareholder value.
Trian Investors 1’s stake amounted to approximately GBP 250 million (U.S. $317 million) and was acquired at an average cost of GBP 52.85 per share. Because Ferguson receives the vast majority of its revenue in U.S. Dollars, Trian currently expects to use a currency hedge to offset a portion of the U.S. Dollar exposure gained as a result of its investment in Ferguson.
Ferguson (which used to be Wolseley) describes itself as the world’s leading specialist distributor of plumbing and heating products. It focuses on the US, UK and Canada and sells through 2,280 branches served by 19 distribution centres. On 10 June it announced results covering the three months to 30 April 2019. Revenue was up 6.2% year-on-year (7.3% on a constant currency basis) and trading profit up 2.3% (2.5%). Net debt to earnings before interest, tax and amortisation was 0.9x. It announced a $500m share buy-back. Organic revenue growth appears to be slowing but they are gaining market share.
TI1: Trian Investors 1 invests in Ferguson