Tags: Ackman | IPO | Pershing Square | fund

Ackman Targets Acquisitions as Pershing Square Fund Drops in IPO

Monday, 13 October 2014 02:08 PM

Activist investor Bill Ackman said he’s preparing to buy a stake in a U.S. company, as shares in one of his funds slumped as much as 12 percent in their Dutch trading debut.

Ackman, 48, said in a speech at Euronext Amsterdam Monday that he’s targeting a “decent-sized stake” in a U.S. company, and will announce the investment in the next couple of months.

Shares in Pershing Square Holdings Ltd. closed down 12 percent at $22 after being priced at $25 in an initial public offering. “The stock is down, which is good,” Ackman quipped after ringing the opening bell. “If it went up we’d have sold it too low.”

Ackman’s activist investment strategies have seen him clash with companies and the U.S. government. The IPO prospectus highlighted the potential risk to investors of such battles, including a suit filed by Allergan Inc. alleging Ackman and other defendants made public misstatements and violated insider trading laws. The filing called the suit “baseless.”

Permanent Capital

Ackman has sought to raise permanent, public capital to shield him against future financial crises, after investors withdrew about 27 percent of his New York-based firm’s capital during the last global turmoil. His funds hold stakes in companies from U.S. mortgage providers Fannie Mae and Freddie Mac to health-care company Allergan and fast-food group Burger King Worldwide Inc.

“We’ve got about $18 billion in capital and a little more than a third of that is in Pershing Square Holdings,” Ackman said. “The cash that we’ve raised we intend to use for a new commitment.”

Pershing Square Holding’s decline is the worst first day performance by a European IPO since Rocket Internet AG sold shares on Oct. 2. Rocket fell as much as 14 percent and closed 12 percent below its IPO price of 42.50 euros ($54) in its trading debut.

“He got the highest price for his fund instead of following the usual practice of pricing a little low to give buyers an early gain,” said Erik Gordon, a professor at the Ross School of Business at the University of Michigan.

The shares couldn’t have been sold for less than $25 because the price is linked to the fund’s net asset value, Ackman said by telephone. As of Oct. 10 the fund’s NAV was $24.41 a share, Pershing Square Holdings said in a statement today.

Market Volatility

The European IPO market has cooled since the start of the month, after online retailer Zalando SE, along with Rocket, disappointed investors. The global market rallied in the third quarter, with companies raising amounts not seen since 2010, including the sale of Alibaba Group Holding Ltd. in the U.S.

“We don’t really generally worry about markets,” Ackman said to reporters on the sidelines of the stock exchange ceremony. “The volatility of the market is generally good for us. Volatility means it’s more likely that a company will trade at the wrong price, and we look for the situation where a great business trades at attractive prices.”

Pershing Square Holdings raised $2.7 billion in the IPO, having increased the size of the IPO from an initial target of $2 billion. The total amount of capital raised was $3.07 billion, valuing the fund at $6.2 billion based on the $25-per- share pricing.

“It’s not an IPO to raise funds to grow a company,” said Gordon. “It’s an IPO to make it easier for Mr. Ackman to hold unpopular positions longer without fear of having to liquidate them to return funds to investors who want to get out. That could be a good move because some of the best positions take a long time to bear fruit.”

KKR Fund

Pershing Square Capital Management LLP is following hedge funds including Brevan Howard Asset Management LLP and Third Point LLC in selling shares of individual funds.

Buyout firm Kohlberg Kravis Roberts & Co. raised $5 billion in an IPO of one of its private-equity funds on Euronext Amsterdam in 2006, selling shares for $25 a piece. KKR Private Equity Investors LP, as the fund was known, fell to as low as $1.97 in 2009. It was delisted in July 2010 when KKR combined with the publicly traded fund and moved its listing to the U.S. from Amsterdam.

Rothschild Bank AG, Rothschild Wealth Management UK Ltd., Qatar Holding LLC, Swedish pension fund Forsta Ap-Fonden, Schroder & Co Bank AG and Blackstone Alternative Asset Management LP were among investors in the stock offering.

Anne Farlow was appointed as chairman of the board of directors of the company. Deutsche Bank AG and UBS AG managed the IPO.

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Activist investor Bill Ackman said he's preparing to buy a stake in a U.S. company, as shares in one of his funds slumped as much as 12 percent in their Dutch trading debut.
Ackman, IPO, Pershing Square, fund
Monday, 13 October 2014 02:08 PM
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