ValueAct Capital Management has amassed a stake in American Express Co., people with knowledge of the matter said, as the activist fund considers pursuing shareholder-friendly changes at the credit-card issuer.

ValueAct’s investment is about $1 billion, still less than 5% of American Express, said the people, who asked not to be identified because the holding isn’t yet public. American Express jumped 3.4 percent to $77.54 at 1:41 p.m. in New York, for a market value of about $78 billion.

The company isn’t yet a core active target of ValueAct, one of the people said. ValueAct sees Amex as a quality business with growth potential, the person said. Still, the fund could sell the position if it decides against a longer-term campaign for changes. ValueAct has held preliminary talks with the payments network.

CEO Ken Chenault is under pressure to demonstrate how Amex, the biggest U.S. credit-card issuer by purchases, can recover from a series of setbacks this year including the end of its partnership with Costco Wholesale Corp. and the loss of a critical antitrust ruling that could put pressure on Amex’s ability to charge merchants higher fees.

Spending on the network is slowing and the company is falling short of its long-term revenue growth goals at the same time the stock had tumbled about 20% this year through Thursday, one of the worst performances in the Dow Jones Industrial Average.

The company is also being forced to reexamine its leadership succession plans following the unexpected death of President Ed Gilligan, who was widely seen by investors as a likely successor to Chenault. After Gilligan’s death in May, Amex has reshuffled some of its top managers and Chenault has taken on more direct reports. Chenault, 64, has been chairman and CEO since 2001 and AmEx’s mandatory retirement age for directors is 72.

“ValueAct is a well-respected firm,” said Marina Norville, a spokeswoman for Amex. “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.”

The fund, which manages more than $18 billion, typically favors good companies with recurring revenues that it views as temporarily mispriced, and prefers influencing managers and directors behind the scenes.

As Amex adjusts to the loss of Costco, which accounts for one in every 10 Amex cards and 20% of total loans, the company has said earnings per share will be unchanged or down modestly this year and quarterly results will be uneven as marketing expenses rise. It’s bolstering card rewards and seeking new retail partnerships and continues to invest in new technology as the market for digital payments accelerates. The company is also seeking to expand its international business.

Warren Buffett, whose Berkshire Hathaway Inc. is the largest investor in Amex, has said that he remains happy with the company and Chenault’s leadership. Charles Munger, vice chairman at Berkshire Hathaway, has said that AmEx’s competitive advantage may be eroding and that maintaining its long period of achievement and prosperity is harder today.

 

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