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 2017)
86 slides from Pershing Square Holdings, Ltd. Public Class USD Accum.Shs's investor presentation, Apr 24, 2017
Slide 1: European Investor Meeting
European Investor Meeting April 24, 2017 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 2017 European Investor Meeting
Welcome to the 2017 European Investor Meeting 2017 YTD Performance Review 2017 Portfolio Update PSH Update Business & Organizational Update Q&A 3
Slide 4: 2017 YTD Performance Review
2017 YTD Performance Review
Slide 5: PSH YTD Performance
Pershing Square Holdings, Ltd. (“PSH”) YTD Performance Q1 2017 Net Returns -2.6% S&P 500 6.1% YTD 2017 Net Returns through 4/18/17 -0.8% S&P 500 5.2% YTD 2017 Share Price Return through 4/21/17 6.2% S&P 500 5.5% Past performance is not necessarily indicative of future results. All investments involv
Slide 6: 2017 Q1 Winners and Losers (Gross Returns)
2017 Q1 Winners and Losers (Gross Returns) Winners PSH Losers PSH Restaurant Brands International 3.2% Fannie Mae (2.2%) Chipotle Mexican Grill 2.0% Mondelez International (2.2%) Platform Specialty Products 1.2% Herbalife (1.9%) Nomad Foods Limited 0.6% Air Products & Chemicals Inc (1.3%) All Other
Slide 7: Total Assets Under Management
Total Assets Under Management $ in millions 3/31/2017 AUM Pershing Square, L.P. $2,671 Pershing Square International, Ltd. $3,155 Pershing Square Holdings, Ltd. $4,399 Pershing Square II, L.P. $81 Total Strategy AUM $10,305 Assets under management are net of any capital redemptions (including crysta
Slide 8: 2017 Portfolio Review
2017 Portfolio Review
Slide 9: (~15% of Capital)
(~15% of Capital)
Slide 10: Mondelez: A Leader in Global Snacking
Mondelez (“MDLZ”): A Leader in Global Snacking Mondelez has the most attractive stable of sweet snack brands of any packaged food company Introduced Introduced in 1912 Easter Egg in Founded 1875 in 1901 Founded in Founded in 1964 Introduced in 1901 1846 10
Slide 11: Snacks is One of the Best Food Categories
Snacks is One of the Best Food Categories Strong global growth and scale ~$1 trillion global market Significant future growth opportunity in international markets Category responds well to advertising and in-store merchandising High category margins Low private-label penetration Strong sal
Slide 12: Mondelez: 2016 Progress Report
Mondelez: 2016 Progress Report Mondelez made meaningful progress on its business transformation in 2016 Delivered four straight quarters of positive underlying volume growth(1) Expanded operating profit margins to 15.3%, up 220 bps from the prior year and up 470 bps from 2013 levels Unveiled
Slide 13: Progress on Business Transformation
Progress on Business Transformation While the company has made steady progress in boosting margins, we believe that optimized margins are far higher Mondelez EBIT Margin +600 - 700 bps 17-18% mid-16% 15% 13% 12% 11% 2013 2014 2015 2016 2017 2018 Optimized Guidance Target Source: MDLZ public filings,
Slide 14: Margins Remain Well Below Best-in-Class Levels
Margins Remain Well Below Best-in-Class Levels CY 2016 EBIT Margin 27.2% 20.4% 19.9% 18.5% 17.4% 16.5% 16.4% 15.3% 15.4% 15.3% Source: Public filings. Note: Represents full year 2016 reported results for all companies except CPB, GIS, and SJM which are based on reported results calendarized to a 12/
Slide 15: MDLZ: Share Price Performance Since Inception
MDLZ: Share Price Performance Since Inception MDLZ’s share price including dividends has increased 17% from our average cost at announcement date to April 18, 2017* MDLZ share price performance from 3/30/2015 to 4/18/2017 $52 3/30/15: 8/6/15: 2/3/16: MDLZ reports 6/30/16: Press reports reveal $50 Pe
Slide 16: (~21% of Capital)
(~21% of Capital)
Slide 17: 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 18: Restaurant Brands International
Restaurant Brands International QSR’s intrinsic value continued to meaningfully increase in 2016, with organic EBITDA growth of 16% Positive SSS growth at both Burger King (+2%) and Tim Hortons (+3%) despite a tougher industry backdrop Historically large price gap between grocery and fast food
Slide 19: QSR: Share Price Performance Since Inception
QSR: Share Price Performance Since Inception As of April 18, 2017, QSR’s share price including dividends has increased 265% (3.65x) from our average cost since it merged with Justice Holdings* Stock price performance of QSR/BKW from 6/19/2012 to 4/18/2017 2/21/17: QSR $60 announces acquisition of Po
Slide 20: (~12% of Capital)
(~12% of Capital)
Slide 21: Air Products: Investment Thesis
Air Products (“APD”): Investment Thesis High-quality, simple, predictable, free-cash-flow generative business Global oligopoly which enjoys attractive returns due to local incumbency advantages driven by high transportation costs for distributing the product Buffered from macro: diversified; c
Slide 22: APD's Transformation Continues
APD’s Transformation Continues CEO Seifi Ghasemi continues his impressive progress transforming Air Products FY 2016 EPS of $7.55 up 14%, despite 3% foreign exchange headwind Exceeded the high-end of initial guidance despite unforeseen macroeconomic and foreign exchange headwinds Operating mar
Slide 23: APD's Upside Remains Significant
APD’s Upside Remains Significant FY 2017 guidance calls for $6.00 to $6.25 of EPS (+6% to 11%) Driven by continued operating productivity and growth capex contribution Operating potential remains significant $225mm of operating productivity potential remains $100mm to be realized in FY 201
Slide 24: APD: Share Price Performance Since Inception
APD: Share Price Performance Since Inception APD’s share price including dividends and the spinoff of Versum increased by 67% from our average cost at announcement date to April 18, 2017 Stock price performance of APD from 5/22/2013 to 4/18/2017 10/1/16: APD 9/26/14: APD announces 1/29/15: FY Q1 EPS
Slide 25: (~13% of Capital)
(~13% of Capital)
Slide 26: Chipotle Mexican Grill (CMG)
Chipotle Mexican Grill (CMG) Superb restaurant brand that pioneered the “fast casual” category with the success of its outstanding product offering, unique culture, and powerful economic model Founded by Chairman and CEO Steve Ells in 1993 High quality, simple, predictable, unlevered, free-cas
Slide 27: Recent Events Create Opportunity for Long-Term Investor
Recent Events Create Opportunity for Long-Term Investor We believe that a good time to buy a great business is when it is in temporary trouble While Chipotle’s reputation has been bruised, we believe that the business will ultimately recover and become stronger aided by: Improved governance In
Slide 28: Attractive Investment
Attractive Investment Despite recent events, we believe that all of the key drivers of Chipotle’s powerful economic moat and long-term success remain intact Strong and relevant brand built by visionary leadership Differentiated product offering with a highly attractive value proposition Substa
Slide 29: Strong Brand
Strong Brand Ambition to change the way the world thinks about and eats fast food and ensure that better food is accessible to everyone Loyal customer following enabled Chipotle to grow from one restaurant in 1993 to more than 2,200 today We believe that Chipotle is currently one of the most c
Slide 30: Differentiated Product Offering
Differentiated Product Offering We believe CMG’s winning value proposition is that it successfully competes in all the desirable attributes of out-of-home fast eating Key Value Proposition High Quality Food Fresh, non-processed, stringent sourcing requirements Taste Delicious (chef-quality) Customiz
Slide 31: Significant Growth Opportunity
Significant Growth Opportunity We believe that the Chipotle brand is still in its growth phase with significant opportunity to increase its unit count and its average unit volume. The drivers of this growth include: “Fast Casual” category growth Mobile and online opportunity Catering opportuni
Slide 32: Fast Casual Will Continue to Grow Share in the U.S.
We Believe that Fast Casual Will Continue to Grow Share in the U.S. Traditional Casual At-Home Fast Food Dining Dining Searching for healthier, Searching for better Slowing family formations convenient hot meals value and more More women in workforce Lacking “generational convenience witho
Slide 33: Digital and Catering Opportunity
Digital and Catering Opportunity Digital ordering should appeal to Chipotle customer demographic Mobile and Online Hired former Starbucks CIO Curt Garner in November 2015 to advance digital capabilities Ordering 100% company-owned store base allows for common technology platform Strong growt
Slide 34: Food Safety Advancements
Food Safety Advancements While food safety risk can never be completely eliminated, we think Chipotle has done an excellent job of significantly reducing the risk of another incident while maintaining the quality and taste of its food 1. SUPPLIER INTERVENTIONS 5. FOOD SAFETY CERTIFICATION 2. ADVANCE
Slide 35: Other Attractive Attributes
Other Attractive Attributes Chipotle has a number of other attractive attributes that help to mitigate investment risk Limited global macroeconomic sensitivity and foreign currency exposure Simple business model with limited non-GAAP earnings adjustments High effective tax rate of nearly 40%
Slide 36: Timeline of Events
Timeline of Events Sept 6 2016 Pershing Square files 13D announcing ~10% stake in Chipotle Constructive dialogue begins between Pershing Square and Chipotle Mid-Sept 2016 management and board Chipotle names Steve Ells sole CEO on December 12 concurrent with the resignation of former co-CEO Mon
Slide 37: Same-Store Sales Change (YoY)
Recent Sales Trends CMG Monthly Same-Store Sales Change (YoY) 30% 25% 20% Same-Store Sales Change (YoY) 15% 10% 1% 0% (1%) (10%) (20%) (16%) (20%) (20%) (23%) (23%) (24%) (22%) (25%) (30%) (26%) (27%) (30%) (36%) (40%) Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-
Slide 38: CMG: Share Price Performance Since Inception
CMG: Share Price Performance Since Inception CMG’s share price has increased 16% from our average cost at announcement date to April 18, 2017 CMG share price performance from 8/4/2016 to 4/18/2017 $480 8/4/16: Pershing 12/16/16: CMG 4/10/17: Launch of $469 Square first announces a board “As Real as
Slide 39: (~12% of Capital)
(~12% of Capital)
Slide 40: Howard Hughes Corporation
Howard Hughes Corporation HHC was formed so that certain GGP assets could receive appropriate management attention and recognition in the public markets HHC’s mission is to be the preeminent developer and operator of master planned communities (MPCs) and mixed-use properties Majority of value
Slide 41: Howard Hughes Corporation (Continued)
Howard Hughes Corporation (Continued) HHC continued to enhance the value of its key assets and business Significant progress at the Seaport District (New York City) Highly valuable 400,000 SF development is expected to have its grand opening in summer 2018, and will include a 1.5 acre rooftop ye
Slide 42: HHC: Share Price Performance Since Inception
HHC: Share Price Performance Since Inception As of April 18, 2017, HHC’s share price increased 234% (3.34x) since the spinoff from GGP in November 2010 Stock price performance of HHC from 11/5/2010 to 4/18/2017 9/9/15: Signed Jean-Georges $180 to open at the Seaport 2/23/17: Management conducts firs
Slide 43: (~-10% of Capital)
(~-10% of Capital)
Slide 44: The FTC Weighs in…
The FTC Weighs in… ► On July 15th, 2016 the FTC filed a Complaint for Permanent Injunction and Other Equitable Relief (the “Complaint”)(1) against Herbalife.(2) The same day, Herbalife filed an 8-K, which included a Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment (the “P
Slide 45: The FTC Weighs in…
The FTC Weighs in… ► A detailed presentation reviewing the Complaint and Permanent Injunction is available here, however it is clear – The findings of the FTC substantially agree with our assertion that Herbalife operates as a pyramid scheme: “[Herbalife] does not offer participants a viable retai
Slide 46: Beyond the FTC Injunction
Beyond the FTC Injunction ► Decelerating International Growth Growth in China – Herbalife’s 2nd largest market – has inflected in recent quarters ► SEC probing HLF’s anti-corruption compliance in China; DOJ involved ► Management Turnover Michael Johnson is slated to become Executive Chairman in
Slide 47: HLF: Recent Events
HLF: Recent Events ► Herbalife shares have appreciated in 2017 (+24%), driven by a $1.45bn refinancing package / $1.5bn share repurchase authorization Partially offset by recent disclosure: Q4 top-line results below guidance driven by both weak volume and FX headwinds New SEC / DOJ China corrupt
Slide 48: HLF: Performance Since Short Inception
HLF: Performance Since Short Inception HLF’s share price has increased 32% including dividends from our average cost at announcement date to April 18, 2017 Stock price performance of HLF from 5/1/2012 to 4/18/2017 $85 7/15/16: FTC Complaint and 11/01/16: HLF 3/11/14: PSCM Herbalife Settlement Agreem
Slide 49: (~6% of Capital)
(~6% of Capital)
Slide 50: Fannie Mae and Freddie Mac
Fannie Mae (“FNMA”) and Freddie Mac (“FMCC”) Despite significant share price volatility since the 2016 US elections, we believe the shares of a reformed Fannie and Freddie will be worth a multiple of their current price Investment thesis as first presented at Annual Dinner in 2014: Fannie and Fred
Slide 51: Key Principles for Reform
FNMA and FMCC: Key Principles for Reform We continue to believe that a reformed Fannie and Freddie is the only viable solution for mortgage finance reform Our key principles for reform as presented at Ira Sohn in 2014: Key elements to reform the GSEs: Significantly increase the GSEs’ capital requi
Slide 52: Secretary Mnuchin Comments
FNMA and FMCC: Secretary Mnuchin Comments We believe the new administration will work with Congress to successfully reform Fannie and Freddie US Treasury Secretary Steve Mnuchin on Nov. 30, 2016: “We gotta get Fannie and Freddie out of government ownership. It makes no sense that these are owned by
Slide 53: Secretary Mnuchin Comments
FNMA and FMCC: Secretary Mnuchin Comments We believe the new administration will work with Congress to successfully reform Fannie and Freddie (cont.) US Treasury Secretary Steve Mnuchin on Jan. 19, 2017: “For very long periods of time, I think that Fannie and Freddie have been well run without creat
Slide 54: Perry Case Developments
FNMA and FMCC: Perry Case Developments Perry Case Development: In February, the D.C. Circuit Court of Appeals upheld a lower court ruling against shareholder plaintiffs, concluding that the FHFA has broad discretion as conservator and refusing to invalidate the Net Worth Sweep We believe that the
Slide 55: FNMA and FMCC: Performance Since Inception
FNMA and FMCC: Performance Since Inception FNMA and FMCC share prices have increased 4% and 7%, respectively, from our average cost at announcement date to April 18, 2017 Stock price performance of Fannie and Freddie from 10/4/2013 to 4/18/2017 5/5/14: Pershing Square presents investment thesis at 2
Slide 56: (~5% of Capital)
(~5% of Capital)
Slide 57: Platform Specialty Products Corporation
Platform Specialty Products Corporation 2016 was a year of stabilization and positive progress for Platform Solidified core leadership team Rakesh Sachdev, CEO (Former Sigma Aldrich CEO) started in Jan. Diego Casanello, Ag President (Former Ag exec. at BASF) started in Feb. Regained momentum
Slide 58: PAH: Share Price Performance Since Inception
PAH: Share Price Performance Since Inception Since the IPO on the London Stock Exchange in May 2013 to April 18, 2017, PAH’s share price has increased 29% Stock price performance of Platform from 5/16/2013 to 4/18/2017 10/3/14: Pershing Square purchases 9.4mm additional PAH shares at $25.59 $30 incr
Slide 59: (~4% of Capital)
(~4% of Capital)
Slide 60: Nomad Foods
Nomad Foods (“NOMD”) Nomad’s acquisitions of Iglo and Findus give it the leading branded frozen foods business in Europe Leading positions in UK, Italy, Germany, France, Spain, and Nordic region Stable, high-margin, cash-flow generative with low capex and cash taxes Recent performance has shown
Slide 61: NOMD: Share Price Performance Since Inception
NOMD: Share Price Performance Since Inception NOMD share price has increased 8% from our average cost to April 18, 2017 Stock price performance of NOMD from 1/1/2015 to 4/18/2017 24 8/13/15: Nomad announces acquisition 8/27/15: Q2 results: of non-UK assets of Findus LFL revenue -4%; Easter altered
Slide 62: Exited Positions
Exited Positions
Slide 63: Positions Exited in 2017
Positions Exited in 2017 Undisclosed Position 63
Slide 64: Valeant: Price Performance Since Inception
Valeant: Price Performance Since Inception VRX’s share price has declined 94% from our average cost at announcement through March 14, 2017 Stock price performance of VRX from 2/9/2015 to 3/14/2017 $300 $250 Stock price $200 $196 $150 $100 $50 $11 $0 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 N
Slide 65: PSH Update
PSH Update
Slide 66: London Listing
London Listing
Slide 67: London Listing: Overview
London Listing: Overview PSH has decided to seek a London Listing To improve market access for investors Increase liquidity in PSH shares Assist in narrowing the current discount to net asset value PSH Annual General Meeting (“AGM”) to be held on 25 April 2017 will include proposals relate
Slide 68: London Listing: Overview
London Listing: Overview Following Admission Investors will be able to trade PSH shares on both markets PSH shares will be quoted and traded in Sterling in London and in USD on Euronext Amsterdam The Company’s listing on Euronext Amsterdam will not be affected It is expected that PSH will
Slide 69: London Listing: Key Structural Changes Required
London Listing: Key Structural Changes Required The key changes revolve around the Company’s current voting arrangements On certain “specified matters” voting arrangements are proposed to be modified in a way that Requires a vote of only Public Shareholders Is compatible with the UK Listing
Slide 70: London Listing: List of Specified Matters
London Listing: List of Specified Matters Any decision to cancel the London listing of the Public Shares The adoption by PSH of an employee share plan if it involves, or may involve, the issue of new shares or the transfer of treasury shares The adoption by PSH of a long-term incentive plan, i
Slide 71: London Listing: FTSE UK Index Eligibility
London Listing: FTSE UK Index Eligibility The Company believes that inclusion in the FTSE UK Index Series will raise its profile in the UK market FTSE index inclusion can be expected to drive new buying demand from index trackers and other passive investors which should have a positive impact on
Slide 72: London Listing: Timeline
London Listing: Timeline Key Dates Record Date for AGM Proxy Voting 4 April 2017 Voting Closed 21 April 2017 at 10:00am BST Annual General Meeting 25 April 2017 at 10:00am BST Admission to London Exchange (subject to 2 May 2017 London Listing proposals being approved at AGM) Determined on a quarterl
Slide 73: Buyback Program
Buyback Program
Slide 74: Buyback Program
Buyback Program PSH to commence buyback program of up to 5% of the outstanding public shares upon PSH’s ordinary public shares being admitted on the London Stock Exchange expected to be effective May 2, 2017 We believe that the repurchase is a good use of cash and will assist in reducing the cur
Slide 75: Trading Data
Trading Data
Slide 76: PSH Discount to NAV
PSH Discount to NAV 10% 5% 0% -5% -10% -15% -20% -25% Source: Bloomberg. 76
Slide 77: 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 14, 2017 PSH historical weekly trading volume from 1/2/2015 to 4/14/2017 16,000 1/2/2015 to 4/14/2017 Weekly average: 3.6m shares 14,000 Daily average: 0.7m sh
Slide 78: PSH Broker Trading Volume
PSH Broker Trading Volume January 1, 2015 - April 18, 2017 Total Dollars Traded Broker Ranking Broker Name Total Shares Traded at VWAP 1 (DEXC) DEXION CAPITAL PLC 54,320,403 $ 1,045,385,942 2 (JEFF) JEFFERIES & CO., INC. 44,608,255 $ 858,477,480 3 (DBK) DEUTSCHE BANK AG 31,573,870 $ 607,633,192 4 (C
Slide 79: Business & Organizational Update
Business & Organizational Update
Slide 80: Organizational Updates in March 2017
Organizational Updates in March 2017 Tim Barefield, COO retired ► Over 10 years at the firm Tim has been responsible for building out a best-in-class operation ► Tim plans on returning to academia Nicholas Botta, CFO, assumed the title of President and is responsible for non-investment team related
Slide 81: Personnel Updates in 2017
Personnel Updates in 2017 Departure of two employees ► Joe Sutton, CTO, in January 2017 ► Marty Khan, Application Support Specialist, in February 2017 Addition of four employees ► Adam Driansky, Controller, in April 2017 Perella Weinberg Partners PricewaterhouseCoopers B.S. and M.B.A., Kelley
Slide 82: Personnel Updates in 2017
Personnel Updates in 2017 Addition of four employees (continued) ► Bharath Alamanda, Investment Analyst, in September 2017 KKR & Co. Goldman, Sachs & Co. B.S.E., Princeton University ►Feroz Qayyum, Investment Analyst, in September 2017 Hellman & Friedman Evercore B.A., Richard Ivey Schoo
Slide 83: Current Organization
Current Organization William Ackman CEO & Portfolio Manager Steve Fraidin Nicholas Botta Vice Chairman Presi I T I T I I | INVESTMENTTEAM LEGAL & COMPLIANCE TRADING INVESTOR RELATIONS FINANCE HUMAN RESOURCES PUBLIC RELATIONS ‘TECHNOLOGY L | l i | L | i Tony Asnes Francis McGill . Halit Coussin Ramy
Slide 84: Questions & Answers
Questions & Answers
Slide 85: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results Presentation of Performance Results and Other Data The performance results of PSH and Pershing Square, L.P., the Pershing Square fund with the longest performance track record, included in this presentation are presented on a gross and net-of-f
Slide 86: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results With respect to APD, "average cost" accounts for positions in both the Pershing Square funds and the PS V, L.P and PS V International, Ltd., co-investment vehicles formed to invest in the securities of (or otherwise seek to be exposed to the va
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