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Bill Ackman's $2.2 Billion Bet on Air Products

July 31, 2013 | About:
Monica Wolfe

Monica Wolfe

119 followers
Earlier this summer, Bill Ackman started canvassing investors for additional funds with the intent of targeting a single stock, and the speculation to what company this would be grew rampant. First it was FedEX (FDX), but then attention switched to the residential security business ADT Corporation (ADT). Then, as it was reported this morning, Ackman’s target would be Air Products (APD).

Ackman disclosed this after the company enforced a shareholder rights plan in response to what it called “unusual and substantial activity” in its shares. The news release also stated:

The Board of Directors believes that the Rights Plan will help promote the fair and equal treatment of all stockholders of the Company in the event of an accumulation of a substantial block of the Company’s shares and ensure that the Board of Directors remains in the best position to discharge its fiduciary duties to the Company and its stockholders. The Rights Plan has not been adopted in response to any specific takeover bid or other proposal to acquire control of the Company.

On Wednesday, Guru Bill Ackman confirmed that his hedge fund, Pershing Square, had in fact disclosed a 9.8% stake in the company as well as the intent to engage in a discussion with management and the board, aiming for a change.

According to Ackman’s SEC filing, Pershing Square purchased a total of 20,545,284 shares over the past two months. The filing reports that the Pershing Square bought shares at prices ranging from $91.57 to $106.36 beginning in June and stretching all the way to Tuesday.

The transaction, valued at $2.2 billion, is the first single-stock fund Ackman has raised money since Target (TGT) in 2007 which lost 65% of its value over the following two years. Air Products will also be the largest investment in Pershing Square Capital Management’s history.

As a result of hearing of Ackman’s massive stake, Air Products released a statement regarding the Pershing Square investment which was more than a little defensive.

The press release stated, “The Company has not been contacted by Pershing Square Capital Management but welcomes new investors and looks forward to engaging with Pershing Square to understand its views.” The statement went on to highlight what the company has recently done to improve their operations and increase shareholder valued. The press release also went on to say “The Company noted that its 2013 total shareholder return of 21.6% through July 24 is more than double that of its industrial gas peer group, and that on a one- and three-year basis total returns have exceeded that of its closest peer (Praxair).”

Air Product’s historical price growth in comparison to Praxair (PX):

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You can view the entire press release here.

Air Products is a supplier of hydrogen and helium. It also provides semiconductor materials, refinery hydrogen, natural gas liquefaction, and advanced coatings and adhesives. It serves technology, energy, industrial, and healthcare customers globally with a unique portfolio of products, services, and solutions that include atmospheric gases, process and specialty gases, performance materials, equipment, and services.

Air Products & Chemical’s historical price, revenue and net income:

1375288634322.png

Air Products has a market cap of $22.7 billion with a P/E ratio of 23.50, a P/S ratio of 2.30 and a P/B ratio of 3.60. The company has seen an annual average earnings growth of 6.5% over the past ten years.

Since the news of Ackman’s buy, Air Products is trading up about 3% to $108.33 per share.

Rating: 2.9/5 (11 votes)

Comments

wescileppi
Wescileppi - 11 months ago
Ackman is in. Time to short it.
Dr. Paul Price
Dr. Paul Price premium member - 11 months ago
Monica,

You stated, "The transaction, valued at $2.2 billion, is the first single-stock fund Ackman has raised money since Target (TGT) in 2007 which lost 90% of its value over the following two years."

Target peaked at $70.80 in 2007. It troughed at $25 in early 2009. The worst of the decline was a very bad (-64.7%) rather than the (-90%) you indicated. Perhaps the 90% loss refers to Ackman's fund itself which could have lost 90% due to use of leverage.

Target had fully recovered to $71.25 (not including dividends) as of July 31, 2013 although it came back well after Mr. Ackman had exited.

Please leave your comment:


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