Pershing Square Capital Management this morning filed a report with the U.S. Securities and Exchange Commission revealing that it has purchased a 9.8% stake (about 20.55 million shares) in Air Products & Chemicals Inc. (NYSE: APD). The move could not have been too big a surprise to Air Products, which last week adopted a poison pill in response to reports that Pershing Square and its chief, Bill Ackman, were building up a stake in the company.
The $2.2 billion that Ackman paid for its stake in Air Products is the largest investment that he has ever paid for a stake in a company. The previous high was a $1.8 billion stake in consumer products giant Procter & Gamble Co. (NYSE: PG). That one resulted in the ouster of P&G’s CEO and a gain of about 32% on Ackman’s investment.
Not everything has turned out so well though. Ackman’s stake in J.C. Penney Co. Inc. (NYSE: JCP) turned sour and resulted in the hiring and firing of the company’s CEO without a concomitant sharp rise in the share price.
And then there is Herbalife Ltd. (NYSE: HLF). Ackman’s $1 billion short play has been absolutely crushed, and about the only thing that will save it would be a federal investigation. That may still happen, but the odds are against it. In fact, there’s a report that investor George Soros has taken the other side of Ackman’s bet against Herbalife. Soros acquired about an 8% stake in J.C. Penney stock earlier this year, giving Ackman some relief from the plunging stock.
Ackman did score a big win with his attack on Canadian Pacific Railway Ltd. (NYSE: CP). Again, he was able to force the resignation of the CEO and he took control of the board. The railroad’s share price has more than doubled since his $1.4 billion investment in 2011. Ackman said in early June that he plans to sell about 30% of his stake in Canadian Pacific over the next six to 12 months.
Another success, at least so far, is the 11% stake in Burger King Worldwide Inc. (NYSE: BKW) that Ackman took when that company came public last year. Burger King’s share price is up about 25% since the initial public offering.
Air Products, on the surface, looks like another investment like P&G or Canadian Pacific: a company with little share price growth, or any real growth for that matter, and a chief executive officer who has had three years to turn things around. Air Products might be a different story because it is one of the S&P Dividend Aristocrats and has increased its annual dividend for 30 consecutive years. Some 86% of the company’s shares are held by institutional holders, and the company pays a dividend yield of 2.70%.
How persuasive Ackman can be with those dividend-oriented shareholders likely will be the determining factor on whether this latest investment is a success.
Air Products shares are up 2.7% just before noon today at $108.53, after posting a new 52-week high of $109.98. The 52-week low is $76.78.