#4 Canadian Pacific Railway Limited (USA) (NYSE:CP)
– Shares Owned by Pershing Square (as of December 31): 13.94 Million
– Value of Pershing Square’s Holding (as of December 31): $1.78 Billion
– Q1 Return: 4.2%
In October 2011, Pershing Square disclosed a 12.2% stake in Canadian Pacific Railway Limited (USA) (NYSE:CP) comprised of 20.7 million shares, after which Mr. Ackman and his team launched a proxy fight with the company’s Board of Directors. The activist investor came out victorious, as CEO Fred Green and five members of the company’s Board stepped down in May 2012. The overhauled Board of the Calgary-based railroad company appointed Hunter Harrison as the new CEO, and he responded by implementing a series of operational changes aimed at driving up the company’s performance. Shares of Canadian Pacific Railway increased to as much as $220 at the end of September 2014 from only $62 at the end of October 2011. However, shares have stumbled somewhat since then, having declined by 27% in the past 52 weeks, which has led Pershing Square to acknowledge that it did not cash out at the right time. Shares did appreciate by 4.2% in the first quarter however.
The transcontinental railway company has been trying to take over Norfolk Southern Corp. (NYSE:NSC), but the target has fiercely opposed the takeover efforts so far. In December 2015, Canadian Pacific Railway stated that “the interests of the NS [Norfolk Southern] board are not aligned with the best interests of NS shareholders”, as “neither the executive leadership at NS nor its board of directors are willing to sit down in an open and constructive dialogue”. John Griffin’s Blue Ridge Capital acquired a stake of 1.17 million shares in Canadian Pacific Railway Limited (USA) (NYSE:CP) during the October-to-December quarter.
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#3 Mondelez International Inc. (NASDAQ:MDLZ)
– Shares Owned by Pershing Square (as of December 31): 43.37 Million
– Value of Pershing Square’s Holding (as of December 31): $1.94 Billion
– Q1 Return: -10.1%
According to its quarterly 13F for the December quarter, Pershing Square owned 43.37 million shares of Mondelez International Inc. (NASDAQ:MDLZ) on December 31, excluding shares underlying forward purchase contracts or shares underlying call options. However, the activist firm recently trimmed its stake in the maker of Oreo cookies, as revealed by a 13D submitted with the SEC in mid-March. The public filing disclosed an ownership stake of 88.20 million shares, which included only 22.94 million shares of common stock and 65.26 million shares underlying American-style call options. Mr. Ackman reported that the shares, which lost 10.1% in the first quarter, were sold for portfolio rebalancing purposes.
The global snack-food company generated net revenue of $29.64 billion in 2015, down from $34.24 billion in 2014 and $35.30 billion in 2013. The decrease in the company’s top-line figure was mainly driven by the appreciation of the U.S dollar against most global currencies during 2015. Meanwhile, Mondelez International’s organic net revenue grew by $1.13 billion in 2015 to $31.60 billion. The increase was mainly attributable to higher net pricing, which was partially offset by unfavorable volume/mix. The positive effect of net pricing was driven by input cost-driven pricing actions undertaken throughout 2015, whereas the unfavorable volume/mix was mainly due to price elasticity and strategic decisions to exit specific low-margin product lines. Shares of Mondelez are currently trading at around 20.5-times expected earnings, significantly above the forward P/E ratio of 17.5 for the companies included in the S&P 500 Index. Nelson Peltz’s Trian Partners reported ownership of 48.03 million shares of Mondelez International Inc. (NASDAQ:MDLZ) through its 13F filing for the December quarter (read more details).
