Investor Bill Ackman runs Pershing Square, a hedge fund with about $11 billion under management. Ackman’s general strategy is a combination of value investing and activism — Pershing Square buys up large stakes in undervalued companies and works with the firm’s management to improve the underlying business.
In the second quarter, Pershing Square purchased a large stake in Air Products & Chemicals, Inc. (NYSE:APD), sold some of its General Growth Properties Inc (NYSE:GGP) , and bought nearly $2 billion worth of calls on The Procter & Gamble Company (NYSE:PG).
Ackman’s next war could be with Air Products
In the second quarter, Ackman acquired over 10 million shares of Air Products & Chemicals, Inc. (NYSE:APD) for his primary fund Pershing Square. He also bought shares of the company in a special purpose vehicle, raising additional funds to push for change.
Air Products & Chemicals, Inc. (NYSE:APD)’s management caught on to Ackman’s activities, and adopted a poison pill back in July. If any single shareholder were to acquire more than 10% of the company, existing shareholders would be granted the right to purchase more shares — thereby diluting Ackman’s stake. Consequently, Ackman stopped just short of the 10% threshold.
Pershing Square has yet to make its plan for Air Products & Chemicals, Inc. (NYSE:APD) known. But if the management disagrees with Ackman, he will likely make his ideas public, as frequently turns to the media.
Pershing Square was forced to fight a proxy contest with Canadian Pacific — a contest it ultimately won. Pershing Square’s new management team has done a phenomenal job of turning around the company, and shares are up more than 44% in the last year.
It’s possible that something similar could happen with Air Products & Chemicals, Inc. (NYSE:APD). The company hasn’t been a particularly good investment in recent years — since 2010, shares are up 2%, and that includes the recent rally prompted by Ackman’s involvement.
If Ackman begins agitating for a change, the company’s suffering shareholders could accept his ideas.
Ackman pairs back General Growth
Pershing Square’s investment in General Growth Properties Inc (NYSE:GGP) has been impressive, to say the least. During the depths of the financial crisis, Pershing Square brought up a large stake in the company at about $0.71 per share.
Those shares are now worth about $20, not to mention the value of the spin-off, Howard Hughes.
But now, after nearly 5 years, Pershing Square may be starting to exit. The firm sold about 9% of its stake in the second quarter.
Last year, Pershing Square and General Growth Properties Inc (NYSE:GGP) had a disagreement. Ackman wanted General Growth to sell itself to rival Simon Property Group, while General Growth Properties Inc (NYSE:GGP)’s management wished to remain independent.