Pershing Square Holdings, Ltd. Public Class USD Accum.Shs · LSE:PSH
Pershing Square Holdings, Ltd. Public Class USD Accum.Shs — Pershing Square Holdings — Investor Presentation (April 2016)
82 slides from Pershing Square Holdings, Ltd. Public Class USD Accum.Shs's investor presentation, Apr 26, 2016
Slide 1: European Investor Meeting
European Investor Meeting April 26, 2016 Pershing Square Capital Management, L.P.
Slide 2: Disclaimer
Disclaimer All information provided herein is for informational purposes only and should not be deemed as a recommendation to buy or sell any security mentioned. Pershing Square Capital Management, L.P. (“Pershing Square”) believes this presentation contains a balanced presentation of the performanc
Slide 3: Welcome to the 2016 European Investor Meeting
Welcome to the 2016 European Investor Meeting 2016 YTD Fund Performance Review 2016 Portfolio Update PSH Update Team Q&A 2
Slide 4: 2016 YTD Fund Performance Review
2016 YTD Fund Performance Review
Slide 5: Pershing Square Holdings YTD Performance
Pershing Square Holdings, Ltd. (“PSH”) YTD Performance Q1 2016 Net Returns -25.6% S&P 500 1.3% YTD 2016 Net Returns through 4/19/2016 -16.8% S&P 500 3.5% Past performance is not necessarily indicative of future results. All investments involve the possibility of profit and the risk of loss, includin
Slide 6: Cumulative Net Returns Since Inception of Strategy
Cumulative Net Returns Since Inception of Strategy (January 1, 2004) Pershing Square, L.P. Net Returns vs. Indexes through April 19, 2016 750.00% 700.00% 650.00% 600.00% Pershing Square, 550.00% L.P.: 500.00% 476.7% 450.00% 400.00% 350.00% 300.00% 250.00% 200.00% 150.00% S&P 500: 143.4% 100.00% 50.0
Slide 7: 2016 Q1 Winners and Losers (Gross Returns)
2016 Q1 Winners and Losers (Gross Returns) Winners PSH Losers PSH Air Products & Chemicals Inc 1.4% Valeant Pharmaceuticals (16.2%) All Other Positions 0.3% Mondelez International (3.5%) Herbalife (1.4%) Total 1.7% Platform Specialty Products (1.4%) Zoetis Inc (1.2%) Currency Options (1.1%) Nomad Fo
Slide 8: Long and Short Attribution (Gross Returns)
Long and Short Attribution (Gross Returns) Both our Long and Short investments have meaningfully contributed to performance over time Pershing Square, L.P. Long Short/Hedge 2004 61.6% (5.9%) 2005 53.7% (1.6%) 2006 36.9% (6.9%) 2007 (5.6%) 34.9% 2008 (23.2%) 11.6% 2009 60.5% (11.4%) 2010 43.8% (4.7%)
Slide 9: Total Core Fund Assets Under Management
Total Core Fund Assets Under Management $ in millions 4/1/2016 AUM Pershing Square, L.P. $3,207 Pershing Square International, Ltd. $3,665 Pershing Square Holdings, Ltd. $3,882 Pershing Square II, L.P. $82 Pershing Square V Funds (Air Products) $539 Total Core Fund AUM $10,836 Total Firm AUM $11,375
Slide 10: 2016 Portfolio Review
2016 Portfolio Review
Slide 11: Mondelez International
Slide 12: Mondelez International (MDLZ)
Mondelez International (MDLZ) One of the world’s largest snack companies with 2015 revenues of ~$27 billion(1) ~$65bn equity market capitalization Born out of the breakup of Kraft Foods in 2012 High-quality, simple, predictable, free-cash-flow- generative business Only large, publicly trad
Slide 13: Mondelez: Fantastic Billion Dollar Brands
Mondelez: Fantastic Billion Dollar Brands Mondelez has the most attractive stable of sweet snack brands of any packaged food company Mondelez Billion-Dollar Brands (1) Source: Public filings. (1) Owned by the Coffee JV between Mondelez and D.E. Master Blenders. 12
Slide 14: Snacks is One of the Best Food Categories
Snacks is One of the Best Food Categories Strong global growth and scale $1.2 trillion global market with historical growth of 6% per annum(1) Tremendous future growth opportunity in emerging markets Category responds well to advertising and in-store merchandising High category margins Low p
Slide 15: Mondelez EBIT Margins vs. Peers
Mondelez EBIT Margins vs. Peers CY 2015 EBIT Margin 26.5% 20.0% 17.7% 17.6% 17.2% 15.8% 15.1% 14.8% 14.3% 13.1% Source: Public filings, Pershing Square estimates. Note: Represents full year 2015 reported results for all companies except CPB, GIS, and SJM which are based on reported results calendari
Slide 16: Mondelez is Effectively a New Company
Mondelez is Effectively a New Company We believe MDLZ’s enormous efficiency opportunity exists because MDLZ was created through a series of acquisitions made by legacy Kraft that were never properly optimized or integrated Source: Mondelez February 2015 CAGNY conference presentation. 15
Slide 17: Mondelez Zero-Based Budgeting (ZBB)
Mondelez Zero-Based Budgeting (ZBB) While management has embraced ZBB to address their high G&A, Mondelez’s version of ZBB is much less robust than the 3G approach EBIT Margin Comparison +900 bps +1,300 bps 31% +600-700 bps achieved achieved promised in ~2 years 24% in ~3 years +200 bps in ~5 years
Slide 18: Gross Margin Opportunity: Advantaged Assets
Gross Margin Opportunity: Advantaged Assets Mondelez has invested ~$1.5 billion to upgrade its manufacturing base, which should expand gross margins by ~250 bps by 2018 We are looking forward to substantial increases in gross margins increase as the new Salinas, Mexico facility ramps up We belie
Slide 19: Case Study: Heinz Gross Margins Under 3G
Case Study: Heinz Gross Margins Under 3G Under 3G management, Heinz expanded global gross margins by ~600 bps and Europe gross margins by ~1,100 bps in just two years without a material additional capital investment Heinz Gross Margins: Heinz Gross Margins: Consolidated Europe 49% +1,100 bps +600 bp
Slide 20: Additional Levers for Margin Expansion
Additional Levers for Margin Expansion Mondelez can dramatically improve its profitability using the same tools used by 3G Net revenue management Elimination of unproductive trade spend, particularly in Europe Reduction in global SKU count from ~74,000 in 2013 to ~30,000 in 2015 and materially
Slide 21: Opportunity Far Exceeds Established Targets
Opportunity Far Exceeds Established Targets While management is making progress with their plan to increase margins to 17-18% by 2018, we believe optimized margins are far higher Mondelez EBIT Margin +600 - 700 bps 17-18% 15-16% 13% 12% 11% 2013 2014 2015 2016 2018 Optimized Guidance Target Source:
Slide 22: Mondelez: Share Price Performance
Mondelez: Share Price Performance MDLZ stock increased 8% from our average cost at announcement date to April 21, 2016* MDLZ share price performance from 3/30/2015 to 4/21/2016 $52 8/6/15: Pershing Square 11/6/15-12/16/15: $50 files 13D with 7.5% Pershing Square economic ownership sells 15mm 2/3/16:
Slide 23: Air Products
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Slide 24: Air Products' Transformation is Underway
Air Products’ Transformation is Underway CEO Seifi Ghasemi has made rapid progress transforming Air Products Six consecutive quarters of double-digit EPS growth, every quarter since Seifi became CEO, despite significant FX headwinds Successfully restructured Air Products, creating a decentralize
Slide 25: Air Products' Upside Remains Significant
Air Products’ Upside Remains Significant FY 2016 guidance calls for $7.25 to $7.50 of EPS (+10% to 14%) Assumes no global growth and continued economic weakness Longer-term, we believe the business can grow EPS at a low- to mid-teens growth rate for years to come Catalysts for value creation
Slide 26: APD: Share Price Performance Since Inception
APD: Share Price Performance Since Inception APD stock increased 61% from our average cost at announcement date to April 21, 2016* Stock price performance of APD from 5/22/2013 to 4/21/2016 1/29/16: FY Q1 EPS +15% despite 5% f/x 160 7/23/14: Seifi hosts 10/30/14: APD 9/17/15: APD headwind; operating
Slide 27: Zoetis
Slide 28: Zoetis Inc.
Zoetis Inc. Split-off from Pfizer June 2013 ~$24bn equity market capitalization Largest manufacturer of medication for pets and livestock in the world Only large, publicly traded “pure-play” animal health business Pershing Square began buying Zoetis shares on July 22nd 2014 and currently o
Slide 29: Zoetis Engagement
Zoetis Engagement Board Composition On February 4th, 2015, Zoetis agreed to add Pershing Square investment team member Bill Doyle to the Zoetis board On April 22nd, 2016, after the company had achieved significant business progress, Pershing Square elected to not re-appoint Doyle for another ter
Slide 30: Zoetis Engagement – Cost Structure Initiative
Zoetis Engagement – Cost Structure Initiative Comprehensive initiative to simplify operations, improve cost structure, and better allocate resources to generate $300 million annual cost savings by 2017 Eliminate ~5,000 lower-revenue, lower-margin SKUs Shift from direct sales representation to
Slide 31: Operational Performance and Guidance
Operational Performance and Guidance Performance 2014 Performance: Adj. EPS $1.57 Revenue: ~$4.8bn; Adj. EBIT Margin: 25% 2015 Performance: Adj. EPS $1.77 Revenue: ~$4.8bn (~6% FX Adj. Organic growth); Adj. EBIT Margin: 28% Guidance1 2016 Guidance: Adj. EPS $1.76 Revenue: ~$4.7bn (7% FX
Slide 32: Zoetis: Share Price Performance Since Inception
Zoetis: Share Price Performance Since Inception ZTS stock increased 33% from our average cost at announcement date to April 21, 2016* Stock price performance of Zoetis from 7/22/2014 to 4/21/2016 $60 7/22/14: Pershing $55 Square purchases first Zoetis shares at ~$33 $50 per share $48 Stock price $45
Slide 33: Restaurant Brands International
Restaurant Brands International
Slide 34: Restaurant Brands International
Restaurant Brands International Franchised business model is a capital-light, high-growth annuity Brand royalty franchise fees (4-5% of unit sales) generate high margins Significant unit growth opportunity requires little capital Same-store sales are relatively insulated from economic cycles C
Slide 35: Restaurant Brands International
Restaurant Brands International QSR’s intrinsic value meaningfully increased in 2015, despite substantial headwinds from strengthening USD Strong financial performance in 2015: 21% EBITDA growth before FX Impressive SSS growth at both Burger King (+5%) and Tim Hortons (+6%) Continued progress on
Slide 36: QSR: Share Price Performance Since Inception
QSR: Share Price Performance Since Inception Restaurant Brands International stock has increased 165% from our average cost since it merged with Justice Holdings* Stock price performance of QSR/BKW from 6/19/2012 to 4/21/2016 $45 $41 $40 $35 Share price $30 $25 $20 $15 $16 $10 Note: The performance
Slide 37: Canadian Pacific
Slide 38: CP: Another Year of Progress
CP: Another Year of Progress CP’s revenue growth has been modest, with revenue growth of 1% in 2015, due to tepid macroeconomic growth Despite modest growth, CP’s operational transformation continued at a robust pace in 2015 Operating Ratio (“OR”) of 61% improved 370 bps Approaching four-yea
Slide 39: CP Remains an Attractive Investment
CP Remains an Attractive Investment Recent macroeconomic concerns have caused CP’s shares to trade at a discount to their intrinsic value 2016 guidance calls for an OR below 59% and double-digit EPS growth Tailwinds to EPS growth from a lower share count, pensions, and f/x Q1 Results: record 5
Slide 40: CP: Share Price Performance Since Inception
CP: Share Price Performance Since Inception CP stock increased 251% from our average cost at announcement date to April 21, 2016* 11/13/15: CP’s 4/11/16: CP Stock price performance of CP from 9/22/2011 to 4/21/2016 (CAD) engages in terminates 260 discussions with efforts to 10/2/14: Analyst Day deta
Slide 41: Howard Hughes Corporation
Slide 42: Howard Hughes Corporation
Howard Hughes Corporation HHC was formed so that certain GGP assets, whose full value was not realized in a mall REIT, could receive appropriate management attention and recognition in the public markets Comprised of income-producing operating assets, master planned communities (“MPC”) and strat
Slide 43: Howard Hughes Corporation (continued)
Howard Hughes Corporation (continued) HHC continued to enhance the value of its assets and business Significant growth in NOI provides HHC with an increasing stream of recurring, high-multiple cash flows Run-rate NOI of income producing assets is expected to increase from ~$43m in 2010 to $219m
Slide 44: HHC: Share Price Performance Since Inception
HHC: Share Price Performance Since Inception Since the spinoff from GGP in November 2010, HHC stock has increased 182% Stock price performance of HHC from 11/5/2010 to 4/21/2016 $180 $160 $140 Share price $120 $100 $103 $80 $60 $40 $37 $20 $0 Note: The performance of HHC’s share price is provided fo
Slide 45: Valeant
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Slide 46: Valeant Pharmaceuticals International, Inc.
Valeant Pharmaceuticals International, Inc. Develops and sells medical products with major franchises in eye care, medical dermatology, gastroenterology, and emerging market branded generics ~$11bn equity market capitalization ~$41bn enterprise value Pershing Square began buying Valeant shar
Slide 47: Recent Events
Recent Events Stock price performance Valeant from 12/1/2015 to 4/25/2016 2/4/16: Interim CEO $140 1/7/16: Board appoints Valeant Howard Schiller 2/22/16: Valeant announces investor Director and former CFO testifies in call date and preliminary Ad Hoc Howard Schiller as Interim CEO congressional hea
Slide 48: Pershing Square took action following 51% decline
We are excited for Mr. X to assume leadership of the company Following a 51% decline the day of Valeant’s March 15th investor call, Pershing Square took immediate action to stabilize the company and to protect our investment 47
Slide 49: Significant Progress Since March 15th Investor Call
Significant Progress Since March 15th Investor Call March 15th - Two Pershing Square team members begin two week, on-site diligence process to improve understanding of the company’s business and financial position March 17th - William Ackman joins the board as an observer March 21st - Company
Slide 50: Joe Papa
Joe Papa Papa’s scientific and industry background, shareholder orientation, history of commercial excellence, and strong ethics make him the ideal leader for Valeant Papa has spent his career in the pharmaceutical industry, most recently as CEO of Perrigo, which specializes in OTC and generic dru
Slide 51: Valeant: Share Price Performance
Valeant: Share Price Performance VRX stock has decreased 83% from our average cost at announcement date to April 21, 2016 Stock price performance Valeant from 2/9/2015 to 4/21/2016 $300 $250 $200 $196 Stock price $150 $100 $50 ~$33 $0 Note: The performance of Valeant’s share price is provided for il
Slide 52: Platform Specialty Products
Slide 53: Platform Specialty Products Corporation
Platform Specialty Products Corporation 2015 was a challenging year for Platform Mixed business performance led to 1% decline in underlying EBITDA 4% underlying EBITDA growth in Performance Solutions before corporate costs 5% underlying EBITDA decline in Ag before cost synergies and corporate
Slide 54: Platform Specialty Products Corporation
Platform Specialty Products Corporation Platform is working to address the challenges it faced in 2015 Platform’s current collection of businesses benefit from long-term secular growth trends and have favorable competitive positions New CEO and new Ag President are seasoned executives with the a
Slide 55: Platform: Share Price Performance Since Inception
Platform: Share Price Performance Since Inception Since the IPO on the London Stock Exchange in May 2013, Platform stock has increased 1% Stock price performance of Platform from 5/16/2013 to 4/21/2016 10/3/14: Pershing Square purchases 9.4m additional PAH shares at $25.59 $30 increasing average cos
Slide 56: Fannie Mae & Freddie Mac
Slide 57: Fannie Mae & Freddie Mac (GSEs)
Fannie Mae & Freddie Mac (GSEs) Fannie and Freddie continued to make positive progress in 2015 Underlying earnings in core guarantee business continue to improve Increase in g-fee rate, lower credit losses, and reduction of investment portfolio Reported results volatile due to non-cash account
Slide 58: Fannie and Freddie: Share Price Performance
Fannie and Freddie: Share Price Performance Since Inception Fannie Mae and Freddie Mac stock prices have decreased 24% and 24%, respectively, from our average cost at announcement date to April 21, 2016 Stock price performance of Fannie and Freddie from 10/4/2013 to 4/21/2016 $6.00 $5.50 $5.00 Share
Slide 59: Nomad Foods
Nomad Foods
Slide 60: Nomad Foods (NOMD)
Nomad Foods (NOMD) Nomad’s acquisitions of Iglo and Findus give it the leading branded frozen foods business in Europe, ~2.7x the next largest competitor Leading positions in UK, Italy, Germany, France, Spain, and Sweden Stable, high-margin, cash-flow generative with low capex and cash taxes
Slide 61: NOMD: Share Price Performance Since Inception
NOMD: Share Price Performance Since Inception NOMD stock has declined 21% from our average cost announcement date to April 21, 2016* Stock price performance of NOMD from 1/1/2015 to 4/21/2016 8/13/15: Nomad 11/16/15: Q3 results: 24 announces acquisition of LFL revenue down 8%; plan in place to fix
Slide 62: Herbalife
Slide 63: Herbalife: It's a Pyramid Scheme
Herbalife: It’s a Pyramid Scheme All facts continue to confirm that Herbalife is a pyramid scheme Recently disclosed HLF video emphasizes recruiting and undermines the existence of retail sales CEO Michael Johnson1: “It’s the recruiting, meaning bringing new distributors into our company, which
Slide 64: Herbalife: It's a Pyramid Scheme
Herbalife: It’s a Pyramid Scheme Regulatory action appears forthcoming Regulatory investigations nearing a conclusion In its 10K, filed February 25th 2016, Herbalife added a new disclosure about the U.S. Federal Trade Commission (FTC): The Company is currently in discussions with the FTC regardi
Slide 65: Recent Financial Results Have Been Weak
Recent Financial Results Have Been Weak HLF’s operating results deteriorated in 2015 Revenue declined ~10% in 2015 as weak organic growth was met with substantial FX headwinds. China was – and continues to be – the single bright spot in Herbalife’s financial performance Local currency net sales1
Slide 66: The Pyramid is No Longer Growing
The Pyramid is No Longer Growing… Declining new gross member adds, coupled with constant churn, has caused the total member base to flatline 5.0 30% The pyramid is no longer Total EOP Members (mm) 3.70 20% 4.00 4.00 growing 4.0 YoY Growth (%) 10% 3.20 2.70 3.0 0% 2.10 (10%) 2.0 (20%) 1.0 (30%) 201
Slide 67: The Top of the Pyramid is Closed
The Top of the Pyramid is Closed … A handful of top distributors take nearly all of the cash flow; almost no one joining today can reach the top Declining Total U.S. Membership. From 2014 to 2015, the number of U.S. Members shrank from 554,353 to 545,160. Tighter Concentration of Earnings for To
Slide 68: Herbalife Has Tried to Obfuscate the Facts
Herbalife Has Tried to Obfuscate the Facts In light of steadily declining membership, Herbalife invented a new metric— “Active New Members"— which it claims shows “engagement” by distributors The company introduced this metric on its Q2 2015 earnings call – in conjunction with deterioration in o
Slide 69: Herbalife: Recent Events
Herbalife: Recent Events Despite weak operating performance, robust multiple expansion drove significant share price appreciation in 2015 Stock price performance of HLF from 1/1/2014 to 12/31/2015 $85 15x $75 Forward Adjusted P/E Multiple (x) 13x $65 Stock price 11x $55 9x $45 7x $35 $25 5x 1/1/2014
Slide 70: Herbalife: Performance Since Short Inception
Herbalife: Performance Since Short Inception HLF stock has increased 28% from our average cost* at announcement date to April 21, 2016 Stock price performance of HLF from 5/1/2012 to 4/21/2016 $85 $75 Stock price $65 $58 $55 $47 $45 $35 $25 5/1/2012 11/1/2012 5/1/2013 11/1/2013 5/1/2014 11/1/2014 5/
Slide 71: PSH Update
PSH Update
Slide 72: PSH Bond Offering Summary
PSH Bond Offering Summary PSH issued $1B 7-year senior unsecured notes on June 26, 2015 Maturity: 07/15/2022 Coupon: 5.500% Payable semi-annually on January 15 and July 15 Ratings: BBB (negative outlook) / BBB+ (S&P / Fitch) Over 90 investors participated in the offering No NAV maintenan
Slide 73: "Permanent" Capital
“Permanent” Capital “Permanent” capital(1) represents nearly half of our assets % of Assets as of 3/31/16 4% 3% GP and Affiliates Deferred Incentive Fees(2) 33% PSH NAV 52% (3) PSH Bond External Capital 8% (1) “Permanent” capital represents GP and affiliates, deferred incentive fees, PSH NAV, and PS
Slide 74: PSH Price Per Share
PSH Price Per Share Pershing Square Holdings, Ltd. NAV as of March 31, 2016 Value Shares Price/ Share Pershing Square Holdings Public Shares NAV $ 3,744,964,129 240,128,546 $ 15.60 Pershing Square Holdings Management Shares NAV 137,076,338 8,500,796 $ 16.13 Pershing Square Holdings VoteCo NAV 99,296
Slide 75: PSH Stock Price vs NAV Per Share Value
PSH Stock Price vs NAV PSH’s share price is currently trading at a 10% discount to NAV PSH price performance from 10/14/2014 to 4/19/2016 $30.00 $28.00 $26.00 $24.00 Per Share Value $22.00 $20.00 $18.00 $17.43 $16.00 $15.73 $14.00 $12.00 10/13/14 11/03/14 11/24/14 12/15/14 01/05/15 01/26/15 02/16/15
Slide 76: Historical Weekly Trading Volume
Historical Weekly Trading Volume PSH’s broker-traded volume is double the exchange-traded volume at 70% vs 30% from January 2, 2015 to April 15, 2016 PSH historical weekly trading volume from 1/2/2015 to 4/15/2016 16,000 1/2/2015 to 4/15/2016 Weekly average: 3.8m shares Daily average: 0.8m shares 14
Slide 77: PSH Broker Trading Volume
PSH Broker Trading Volume January 1, 2015 - April 19, 2016 Total Dollars Traded Broker Ranking Broker Name Total Shares Traded at VWAP 1 (DEXC) DEXION CAPITAL PLC 43,978,362 $ 985,226,986 2 (DBK) DEUTSCHE BANK AG 23,261,558 $ 521,117,969 3 (INCA) INSTINET 13,133,984 $ 294,234,593 4 (CSFB) CREDIT SUI
Slide 78: Team
Team
Slide 79: Personnel Updates in 2016
Personnel Updates in 2016 Investment Team Departure Paul Hilal Investment Team Analyst Finance and Accounting Departure Priti Jajoo Controller 78
Slide 80: Questions and Answers
Questions and Answers
Slide 81: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results Except as otherwise stated in this presentation, the performance results of the Pershing Square funds included in this presentation are presented on a net-of-fees basis and reflect the deduction of, among other things, management fees, brokerag
Slide 82: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results Risk Factors Investors in PSH may lose all, or substantially all, of their investment in PSH. Any person acquiring shares in PSH must be able to bear the risks involved. These include, among other things, the following: • PSH is exposed to a co
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