Contrarian Corpus
activist full deck
2018-01-29 · 58 pages

Pershing Square Holdings (fund-level annual review covering multiple portfolio companies: ADP, QSR, MDLZ, HHC, CMG, FNMA/FMCC, PAH, NKE, HLF, SPGI) PSH

N 3 Narrative
V 3 Visual
C 2 Craft
Original source ↗

The three reasons

  1. 1

    Pershing Square has restructured to a smaller, investment-centric organization — 'returning to our roots'

  2. 2

    PSH trades at a ~20% discount to NAV; tender + buyback + LSE listing should close the gap

  3. 3

    Refreshed portfolio (ADP, NKE, CMG, QSR) plus reduced fees create asymmetric setup post-Valeant

Primary demands

  • Close PSH's ~20% discount to NAV via $300m PSCM-affiliate tender offer plus expanded open-market buyback
  • Remove PSH's 4.99% ownership cap at the April 2018 AGM to enable greater capital return flexibility
  • Continue activist engagement at ADP to lift Employer Services growth from 2-4% to 7%+ and operating margins from ~19% to 35%+
  • Recruit a world-class CEO at Chipotle to unlock digital, menu, delivery and international growth

KPIs cited

PSLP cumulative net return since inception (1/1/04 - 12/31/17)
493.6% vs S&P 500 220.8%
Pershing Square L.P. average monthly return
1.2% vs S&P 500 0.8%
Average return in down months
(1.5%) vs S&P 500 (3.5%)
2017 winners contribution to gross returns
+14.6% led by QSR (5.2%), ADP (3.5%), HHC (1.6%)
2017 losers contribution to gross returns
(17.2%) led by HLF (4.0%), MDLZ (3.5%), FNMA/FMCC (3.3%)
Total Firm AUM (12/31/2017)
$8,769m total; $8,259m core funds
PSH discount to NAV
~20%; buybacks executed at 20.1% discount, $77.2m through 5.5M shares
ADP Employer Services growth target
From ~2-4% to ~7%+; operating margin from ~19% to 35%+
ADP valuation
Trades at ~24x FY June 2019 EPS guidance; +18% from PSCM cost
QSR free cash flow multiple
~21x 2018 FCF/share vs peer average ~25x
QSR operating performance
+250bps Burger King EBITDA margin; >+1,000bps at Popeyes; +6% net unit growth
MDLZ valuation
18x 2018 EPS, ~15% discount to peers and historical average
HHC share price since 2010 spinoff
+250% (3.5x) from $37 to $128
PAH 2018 EBITDA multiple
9.5x vs Cabot Micro ~13x and FMC ~12x
Management fee reduction
Reduced ~14% on average for next 8 quarters from Allergan settlement

Pattern membership

Where this document fits across the library's 12 rhetorical / structural patterns.

Notable slides (8)

Notes

Annual investor meeting deck — fund-level portfolio review rather than a single-target activist thesis. Best read as a post-Valeant 'reset' narrative ('Returning to Our Roots' on p.17) bundled with capsule updates on each portfolio name and the case for closing PSH's NAV discount. Each portfolio company gets a thesis page + share-price-since-inception annotated chart, a recurring template worth noting. The 2017 winners/losers attribution slides (p.12-13) and the 'Evolution of Pershing Square Organization' bar/line chart (p.18) are the most graphically interesting. Tone is unusually self-reflective for an Ackman deck ('Experience is making mistakes and learning from them', p.29). Document type judged 'full_deck' rather than 'conference_presentation' because it is a private investor meeting, not a Sohn-style external conference. Campaign phase = unknown (multi-name portfolio update); could arguably be tagged 'follow_up' for the ADP/CMG/HLF discussions but no single campaign dominates.