- Activist spends more than half of call on Herbalife FTC pact
- Mondelez-Hershey potential deal questioned on growth priority
Pershing Square Capital Management’s Bill Ackman said his activist hedge fund has seen relatively low investor redemptions in the first half of 2016.
As a percentage of capital redeemed in the first half over the past eight years, the first six months of this year “would be sixth-lowest,” and 37 percent lower than the firm’s average, Ackman said Wednesday on a Pershing Square investor conference call.
“My guess is that our redemptions that we’ve received as a percentage of capital are probably among the lowest in the industry, and that’s really because we benefit from a very stable capital base and that’s because our investors have been incredibly supportive of us,” he said.
Pershing Square Holdings Ltd., the publicly traded security of Ackman’s activist hedge fund, is down 19.1 percent this year through July 12, the latest weekly data posted online.
Pershing Square posted its worst annual performance in 2015, with a net loss of 20.5 percent, after delivering a 2014 net return of 40.4 percent. The public fund began trading in Amsterdam in October 2014 with the same portfolio as the hedge fund.
Ali Namvar, a partner at Pershing Square, said management at Mondelez International Inc., its largest current investment, will be held accountable for boosting their target for operating margins to between 17 percent and 18 percent by 2018 -- excluding any acquisitions.
The owner of snack brands including Oreo cookies made a takeover offer for Hershey Co. which was rejected by the candymaker last month. Namvar said the half-stock offer would be expensive if equity was issued because Pershing Square views Mondelez shares as undervalued.
“We would find it unacceptable for an acquisition of Hershey by Mondelez to delay or derail the productivity and cost savings transformation that’s under way at the company,” Namvar said on the call.
“Mondelez does not have a strong confectionary presence in the U.S. and clearly Hershey is the dominant U.S. confectionary player,” he said. “One of the reasons we do like Mondelez though is that it has exposure to international markets where there is more growth in these categories than North America.
“So we do have a question as to what Hershey’s growth rate is in the future, and whether it would be better for Mondelez to invest more in its emerging markets business and grow the assets there.”
Ackman devoted more than half of today’s call to his short position at Herbalife Ltd. The nutritional company last week agreed to pay $200 million and make sweeping changes to its business to settle U.S. claims that the nutrition company deceived consumers and distributors with get-rich-quick promises.
Ackman’s Pershing Square has a $1 billion bet against Herbalife’s shares and has spent tens of millions of dollars on a public campaign to expose Herbalife as a pyramid scheme. The attempted takedown has captivated Wall Street since December 2012 when Ackman first presented his thesis at an investor conference.
The U.S. Federal Trade Commission stopped short of declaring Herbalife a pyramid scheme and shutting it down, as Ackman had called for, but wouldn’t clear it of that label either. The regulator described the company’s business in harshly critical terms and said it must restructure, backing up many of the billionaire’s criticisms.