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Trian’s Ed Garden Sees Conglomerate Costs as Activist Targets

The costs that conglomerates face to manage their various businesses as holding companies continue to make them attractive targets for activist investors, said Edward Garden, founding partner at Trian Fund Management LP.

“There’s a cost to a conglomerate,” Garden, who is also Trian’s chief investment officer, said today on Bloomberg Television’s “Market Makers” with Erik Schatzker and Betty Liu. “If you’re not getting less risk and you’re not getting adequate earnings growth, if you have more volatility and materially less growth, then you scratch your head and say, ‘I’m not getting the value for the cost of the conglomerate.’”

Trian, the New York-based money manager founded in 2005 by Garden, Nelson Peltz and Peter May, last year successfully pushed Ingersoll-Rand Plc to sell some of its businesses. Activist funds generally acquire equity stakes in companies and try to force corporate management to make changes that boost share prices and investor returns.

Trian, which in 2006 waged a six-month proxy fight with H.J. Heinz Co. to win seats on the board and convince management to execute a turnaround plan, doesn’t foresee similar battles, Garden said.

“I don’t think we’ll ever have another proxy fight, because our reputation is that we work constructively with management,” he said, while describing the Heinz results as “spectacular.”

Heinz, which makes food products from ketchup to infant formula, has climbed to $72.49 a share through the close yesterday in New York, from around $37 on Feb. 21, 2006, when it first became known that Trian was targeting the company.

Warren Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital Inc. agreed to buy the iconic ketchup maker for about $23 billion in February.

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