Billionaire Bill Ackman’s Letter to Investors: Comments on New Stake in Chipotle, Restaurant Brands International, Mondelez & More

Mondelez International Inc (NASDAQ:MDLZ) is Pershing Square Capital Management’s second-largest position with a total value of $1 billion and containing 22.94 million shares. This $65 billion company has an impressive portfolio of globally recognized snack brands such as Oreo biscuits, Cadbury, Cadbury Dairy Milk and Milka chocolates and Trident gum. Bill Ackman’s fund considers that Mondelez International Inc. (NASDAQ:MDLZ) is one of the few large cap packaged food companies that is demonstrating any underlying volume growth, however modest. While the global growth rate of the company’s snacking categories has moderated over the course of the year primarily due to macroeconomic headwinds, he believes that the long-term outlook for these categories remains robust, especially in the emerging markets where Mondelez International Inc. (NASDAQ:MDLZ) has large market shares and robust routes to market. Year-to-date, the company continues to show progress with its significant cost savings opportunity and productivity initiatives, and remains on track to reach its 2018 margin target of 17% to 18% with further upside beyond 2018.

During the third quarter, Pershing Square Capital Management exited its investments in Canadian Pacific Railway Limited (USA) (NYSE:CP) and Zoetis Inc. (NYSE:ZTS) which were two of its highly successful activist engagements. Bill Ackman sold 9.8 million shares of Canadian Pacific Railway Limited (USA) (NYSE:CP) on August 4, approximately five years after the position had been initiated. During this time period, Canadian Pacific Railway Limited’s (USA) (NYSE:CP) share price increased nearly fourfold and its operating performance went from worst to nearly tied for first with Canadian National Railway (USA) (NYSE:CNI). Its credit rating improved from a weak Baa-/BBB- to a strong Baa+/BBB+ as the company’s financial improved substantially.

Pershing Square also exited its position in Zoetis Inc. (NYSE:ZTS) completely on November 9, two years after he announced an 8.5% stake. Ackman played an activist role in pushing the company to dramatically improve operations. Zoetis Inc. (NYSE:ZTS) developed and implemented a number of value-enhancing initiatives including restructuring its supply chain, pursuing organic revenue growth opportunities while reducing costs, and setting a goal of increasing operating margins from ~25% in 2014 to ~34% by 2017. Pershing Square Capital Management purchased it stake in Zoetis Inc. (NYSE:ZTS) at an average cost of approximately $37 per share. During this period, the stock generated a handsome return of 58% for Pershing Square Capital Management.

Disclosure: None