Paulson, Soros Join Loeb Taking New Stakes in FedExCaroline Chen
Billionaire investors George Soros and John Paulson joined Daniel Loeb’s Third Point LLC in taking stakes last quarter in FedEx Corp., operator of the world’s largest cargo airline.
Soros Fund Management LLC bought 1.52 million shares valued at $173 million at the end of the third quarter, according to a regulatory filing yesterday. Paulson & Co. disclosed a new stake of 646,800 shares valued at $73.8 million.
Loeb, the activist investor who has pushed for change at companies including Sony Corp., said this week that Third Point had acquired a FedEx stake and that he had met with Chief Executive Officer Fred Smith. Third Point reported a holding of 2 million FedEx shares, valued at $228.2 million.
The purchases add three of Wall Street’s highest-profile investors to a list of FedEx shareholders led by Smith, 69, who founded the Memphis, Tennessee-based company and serves as CEO, president and chairman. He owned 19.7 million shares, or 6.2 percent, as of April, according to data compiled by Bloomberg.
“Naturally, the first thing you think of is that these are folks who will be vocal and activists for change,” said Jack Atkins, an analyst at Stephens Inc. in Little Rock, Arkansas. “The push-back question is, what sort of change would they be advocating for?”
Atkins pointed to FedEx’s profit improvement plan and Smith’s recent authorization of the largest share repurchase program in the company’s history as two changes that investors would normally seek.
“They’ve kind of ticked all the boxes off,” he said.
A FedEx spokesman, Jess Bunn, declined to comment yesterday on the Soros and Paulson stakes or whether the investors had met with FedEx leadership. Bunn said earlier this week that Loeb had met with FedEx executives and that it was “a matter of routine business” to confer with shareholders. Representatives for Soros and Paulson declined to comment.
Smith, in an interview with CNBC today, said that he was “flattered” Loeb had made the investment and doesn’t plan on leaving the company in the “foreseeable future.”
PointState Capital LP, started by former employees of Stan Druckenmiller’s Duquesne Family Office LLC, and Ricky Sandler’s Eminence Capital LLC also now hold stakes in FedEx, filings show. Highfields Capital Management LP added 1.09 million shares to its stake, bringing it to 1.59 million as of Sept. 30, according to a filing yesterday.
Hedge fund managers collectively held 3.8 percent of FedEx as of yesterday, up 0.3 percentage points from Nov. 10, according to data compiled by Bloomberg.
If the hedge-fund managers do seek changes, they will have to confront a strong-willed CEO, Atkins said.
“If they think they’re going to come in and get Fred Smith to do their bidding, I think that’s wishful thinking at best,” he said. “Fred Smith is not going to be dictated to by an outside party, especially when shares are hitting an all-time high.”
Atkins has an overweight rating on FedEx shares, equivalent to buy.
FedEx rose 1.6 percent to close at $138.65 at New York. The stock has increased 51 percent this year. That beat advances of 26 percent for the Standard & Poor’s 500 Index and 37 percent for United Parcel Service Inc., the biggest package-delivery company.
Soros Fund Management is the New York-based family office for the 83-year-old hedge-fund industry pioneer and philanthropist. Paulson, 57, made $15 billion for his investors in 2007 by betting against subprime mortgages before the housing collapse. His New York-based firm has about $18 billion in assets.