Ackman to go Public with Pershing Square Holdings in 2013

PERSHING SQUAREPershing Square Capital, the $11bn hedge fund run by high-profile US activist investor Bill Ackman, is planning a $4bn public flotation for a new fund in January 2013,” reports the Financial Times. “Ackman intends to float the vehicle, which has already been set up in Guernsey and is known as Pershing Square Holdings, on a ‘major’ exchange”. PSH is designed to be a “shell company” and would “invest all of its assets in Pershing Square’s offshore hedge funds.”

Pershing Square Capital’s performance overall has been strong historically but its funds all lost between 1.1% and 2% for 2011. Further, Ackman is engaged in several aggressive pursuits right now, such as his large investment and ongoing fight with Canadian Pacific Railway (CP), taking Burger King public again and his continued involvement in JC Penney’s (JCP) turnaround. After the initial float, Ackman’s IPO Pershing Square Holdings (PSH) would provide “a source of permanent capital.”

The IPO, which has initially been scheduled for June, is likely to be launched in London. A float of that size “would instantly propel PSH into the top league of listed corporations, putting it comfortably within the FTSE 100, or most other large-cap indices worldwide,” writes the Financial Times. “A more modest $1bn IPO was initially planned but this has changed over the past few months. In a letter to investors in March, Mr Ackman said ‘PSH will have at least $4bn in assets post IPO. That size will make it by far the largest closed-end hedge fund admitted to trading on a major exchange’.”

Pershing Square’s current investors are being encouraged to push their investments into the holding company with a 4 percentage point discount on its normal 20 percent performance fee. The plan is for a January IPO but PSH has up to four years before it needs to make its move.

“We are launching PSH because the need to manage our capital base for investor liquidity is a rare example of when investor demands can conflict with the investment objectives of our funds,” said Ackman in a letter to investors dated March 7. “Our goal is to increase the amount of our capital that is permanent … with permanent capital we can be more opportunistic during periods of market and investor distress.”