Investment firm ValueAct Takes Stake in AmEx by Investing $1 Billion

Investment firm ValueAct Capital Management LP has taken a $1-billion stake (approx.) in credit card issuer American Express Co., which is already cutting costs due to intense competition that lost it a couple of lucrative co-brand contracts.

American Express jumped 6.3% to $79.72 at 4 PM on Friday in New York—the highest in four years—for a market value of about $80 billion.

It isn't clear at this point if San Francisco-based ValueAct is pressing for changes at the big New York-based card company which has been led by Chief Executive Kenneth Chenault since 2001.

"ValueAct is a well-respected firm," AmEx said in a NASDAQ article. "We have been speaking with them as we do with other investors and look forward to continuing a constructive dialogue. At American Express, we are focused on building long-term value for shareholders and are always open to the views and perspectives of our investors."

ValueAct’s position is the latest example of an activist investor targeting a blue-chip firm. According to FactSet, so far this year, activists have taken stakes in 17 companies with market capitalizations over $10 billion at the time the position became public, a full-year record and more than double the year-to-date average since 2006.

ValueAct’s roughly $1 billion stake represents about 1.3% of AmEx shares. Positions under 5% aren’t required to be quickly reported in regulatory filings.

The investment by ValueAct comes at a particularly rough time for AmEx, which is adjusting to the loss of Costco. American Express discontinued its merchant-acceptance and co-branded credit card agreements with Costco Wholesale Corp. this February. The Costco-Amex card accounted for around $82 billion worth of Amex’s worldwide charge volume last year. Costco had already ended its Amex co-branded card program in Canada last year and Bloomberg had earlier reported that Costco is considering a new US card partner.

The contractual agreement officially expires on March 31, 2016. Amex cards will continue to be accepted at Costco’s 474 US warehouses until then. Costco, which accounted for one in every 10 AmEx cards and 20% of total loans, will hurt AmEx’s earnings for the next two years.

In the first quarter, the company also ended a co-branding deal with JetBlue Airways Corp.