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 (January 2016)
104 slides from Pershing Square Holdings, Ltd. Public Class USD Accum.Shs's investor presentation, Jan 28, 2016
Slide 1: Annual Update Presentation
Annual Update Presentation January 28, 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: Table of Contents
Table of Contents 2015 Performance Review Bond Offering Current Portfolio Update Business & Organizational Update 3
Slide 4: 2015 Performance Review
2015 Performance Review
Slide 5: Pershing Square Holdings, Ltd. Performance
Pershing Square Holdings, Ltd. Performance 2015 Net Returns -20.5% S&P 500 1.4% 2014 Net Returns 40.4% S&P 500 13.7% 2013 Net Returns 9.6% S&P 500 32.4% Past performance is not necessarily indicative of future results. All investments involve the possibility of profit and the risk of loss, including
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 December 31, 2015 750.00% 700.00% 650.00% 600.00% 550.00% Pershing Square, L.P.: 500.00% 567.1% 450.00% 400.00% 350.00% 300.00% 250.00% 200.00% S&P 500: 135.3% 150.00% 100.00% 5
Slide 7: Performance in Up & Down Markets
Performance in Up & Down Markets Pershing Square, L.P. Net Returns vs. S&P 500 (1/1/2004 through 12/31/2015)(1) Average Monthly Return Average Return in Up Months Average Return in Down Months 1.5% 1.4% 2.8% 2.9% 0.0% 3.0% -1.0% 1.0% 2.0% -2.0% (1.2%) 0.7% -3.0% 0.5% 1.0% -4.0% (3.5%) 0.0% -5.0% 0.0
Slide 8: 2015 Winners and Losers (gross returns)
2015 Winners and Losers (gross returns) Winners Losers Allergan Inc 3.9% Valeant Pharmaceuticals (11.4%) Mondelez International 3.3% Herbalife (3.9%) Zoetis Inc 1.2% Canadian Pacific Railway (3.8%) All Other Positions 0.3% Platform Specialty Products (2.8%) Actavis (AGN Short/Hedge) (1.9%) Total 8.7
Slide 9: Long and Short Attribution (Gross Returns)
Long and Short Attribution (Gross Returns) 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%) 2011 2.5% (2.1%) 2012 16.9% 1.1% 2013 25.8% (12.0%) 2014 42.4% 5.8% 2015 (9.3%) (5.6%) HKD
Slide 10: Total Assets Under Management
Total Assets Under Management $ in millions 12/31/2015 AUM Pershing Square, L.P. $4,242 Pershing Square International, Ltd. $4,705 Pershing Square Holdings, Ltd. $5,217 Pershing Square II, L.P. $106 Pershing Square V Funds (Air Products) $487 Total Core Fund AUM $14,270 Total Firm AUM $14,757 Assets
Slide 11: Bond Offering
Bond Offering
Slide 12: 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 13: "Permanent" Capital
“Permanent” Capital “Permanent” capital(1) represents nearly half of our assets % of Assets as of 12/31/15 5% 3% GP and Affiliates Deferred Incentive Fees(2) 34% PSH NAV 51% (3) PSH Bond External Capital 7% (1) “Permanent” capital represents GP and affiliates, deferred incentive fees, PSH NAV, and P
Slide 14: Discount to NAV has Narrowed Since Inception
Discount to NAV has Narrowed Since Inception $30 20.0% $28 17.5% $26 15.0% $24 12.5% $18.62 10.0% $22 7.5% $20 5.0% $18 $17.50 2.5% $16 0.0% -2.5% $14 -5.0% $12 -7.5% $10 -10.0% $8 -12.5% Price per Share Nav per Share Discount to Actual (10-Day Moving Average) 14
Slide 15: Current Portfolio Update
Current Portfolio Update
Slide 16: Principal Mistakes We Made in 2015
Principal Mistakes We Made in 2015 We relied too much on “platform value” We missed opportunities to trim or exit holdings ~$250 ~ C$240 We did not sufficiently discount regulatory risk and political sensitivity At average cost of $196(1) A year when many lessons were learned, 2015 was also an
Slide 17: Other Factors Also Contributed to Poor Results
Other Factors Also Contributed to Poor Results Despite our missteps, we believe our portfolio holdings today trade at a substantial discount to intrinsic value partially because of certain unique market dislocations Concerns regarding oil prices and China’s economy have significantly impacted the
Slide 18: While We Wait for the Weighing Machine…
While We Wait for the Weighing Machine… Over the long term, we believe that the market prices and intrinsic values of our investments will converge Permanency of our capital base will allow us to weather this volatility Our influence on our portfolio companies should allow us to continue to enha
Slide 19: Mondelez International
Slide 20: Mondelez International (MDLZ)
Mondelez International (MDLZ) One of the world’s largest snack companies with 2014 revenues of $30 billion(1) ~$66bn 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 trade
Slide 21: 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. 21
Slide 22: 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 23: Mondelez EBIT Margins vs. Peers
Mondelez EBIT Margins vs. Peers CY 2015E EBIT Margin 26.3% 19.9% 17.0% 16.9% 15.9% 15.5% 15.2% 14.8% ~14% 14.2% Source: Capital IQ, public filings, Pershing Square estimates. Note: Represents calendar year 2015 Capital IQ consensus estimates for all companies except Mondelez which is based on 2015 g
Slide 24: Mondelez is Effectively a New Company
Mondelez is Effectively a New Company We believe MDLZ’s enormous efficiency opportunity exists because it 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. 24
Slide 25: 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 +1,300 bps 31% +900 bps in ~3 years in ~2 years 24% +300 - 400 bps in ~2 years 17% 15-16% 15% 12% FYE LTM 2007 20
Slide 26: 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 a significant gross margin increase as the new Salinas, Mexico facility ramps up We believe the poten
Slide 27: 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 28: 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 2014 Procurement Productivity Cons
Slide 29: Opportunity Far Exceeds Established Targets
Opportunity Far Exceeds Established Targets While management’s plan to increase margins to 15-16% by 2016 is a step in the right direction, we believe optimized margins are far higher Mondelez EBIT Margin +300 - 400 bps 15-16% 14% 12% 2014 2015 2016 Optimized Guidance Target Source: Mondelez public
Slide 30: Mondelez is an Excellent Merger Candidate
Mondelez is an Excellent Merger Candidate Change-of- Advantaged Growth Savings Control Categories Potential Opportunity Potential (1) (2) (1) 10:1 voting ratio applies for shares held for at least four
Slide 31: Mondelez: Share Price Performance
Mondelez: Share Price Performance MDLZ stock increased 15% from our average cost to YE 2015, and 7% to January 22, 2016 MDLZ share price performance from 3/30/2015 to 1/22/2016 $52 8/6/15: Pershing Square $50 files 13D with 7.5% economic ownership $48 3/30/15: Pershing Square $46 first purchases MDL
Slide 32: Valeant
W VALEANT
Slide 33: Valeant Pharmaceuticals International (VRX)
Valeant Pharmaceuticals International (VRX) Multinational pharmaceutical and medical device company >$12bn 2016 estimated sales ~21,000 employees Market leadership in dermatology, gastroenterology, ophthalmology, and consumer health products In 2008, new management implemented an unconvent
Slide 34: Valeant's major franchises are underappreciated
Valeant’s major franchises are underappreciated: ________________________________________________ 34 Chart from Valeant presentation 1/13/16
Slide 35: Valeant's major franchises are underappreciated
Valeant’s major franchises are underappreciated: Bausch & Lomb: ~30% of sales1 Durable product portfolio 11% organic growth in 2014, ~6% growth through Q3 2015 Growth drivers include favorable secular trends and strong product portfolio: Increased prevalence of eye disease supports growth of
Slide 36: Valeant's major franchises and Walgreen's partnership are underappreciated
Valeant’s major franchises and Walgreen’s partnership are underappreciated: US Dermatology: ~15% of sales Largest portfolio of non-biologic medical dermatology products in the United States Prescribers often strongly prefer branded alternative to generics Retained ~80% of volume following Phil
Slide 37: Valeant: Share Price Performance
Valeant: Share Price Performance VRX stock has decreased 48% from our average cost to YE 2015, and 55% to January 22, 2016 Valeant Share Price – 2/9/2015 to 1/22/2016 4/29/15: Valeant announces strong Q1 earnings; CFO Howard Schiller announces retirement, but remains on Board and See next page $300
Slide 38: Valeant: Recent Events
Valeant: Recent Events Pershing Square’s Perspectives on Key Topics Valeant Share Price – 9/1/2015 to 10/29/2015 300 9/20/15: NYT article on price A Price Increases increases in pharma, with focus on - Substantial majority of Valeant’s business units Turing Pharmaceuticals after 9/28/15: House Dems
Slide 39: Valeant: Recent Events (continued)
Valeant: Recent Events (continued) Pershing Square’s Perspectives on Key Topics Valeant Share Price – 9/1/2015 to 10/29/2015 300 C Citron Report 10/21/15: Citron releases report claiming C VRX is “next Enron” using specialty - Claim that VRX “stuffed the channel” and pharmacies to “stuff the channel
Slide 40: Valeant: Recent Events (continued)
Valeant: Recent Events (continued) Pershing Square’s Perspectives on Key Topics Valeant Share Price – 10/30/2015 to 1/27/2015 E Valeant Investor Day 12/24/15: CEO Mike Pearson is admitted - 2016 EBITDA guidance in line with Pershing F to hospital for treatment of “severe” Square expectations pneumon
Slide 41: Valeant shares trade at ~7x management's 2016 EPS target
Valeant shares trade at ~7x management’s ~$14 2016 EPS target (ex-one time items). We expect EPS to exceed $20 by 2020, excluding acquisitions. 41
Slide 42: Air Products
Slide 43: Air Products (APD): Overview
Air Products (APD): Overview One of four global industrial gas companies Air Products’ business is diversified by geography, with modest exposure to emerging markets including China Asia, U.S. / Canada Europe ex. China China SA 42% 24% 16% 12% 6% APD is diversified by supply mode, with signifi
Slide 44: Air Products: Investment Thesis
Air Products: Investment Thesis High-quality, simple, predictable, free-cash-flow generative business Global oligopoly which enjoys attractive returns due to local incumbency advantages driven by utility-like contracts with large customers and the high transportation costs of distributing additi
Slide 45: Air Products' Transformation Begins
Air Products’ Transformation Begins CEO Seifi Ghasemi’s first year marked the beginning of a successful transformation of Air Products 2015 was a year of substantial progress: Successfully restructured Air Products, creating a decentralized organization with greater accountability Took action
Slide 46: Air Products' Upside Remains Significant
Air Products’ Upside Remains Significant Despite APD’s significant progress, recent macroeconomic concerns have caused APD’s stock to trade at what we believe to be a material discount to its intrinsic value APD’s business remains resilient: diversified; contracted; low-cost, critical and consum
Slide 47: APD: Share Price Performance in 2015
APD: Share Price Performance in 2015 The total return for APD shares was -8% in 2015 Stock price performance of APD from 1/1/2015 to 12/31/2015 10/29/15: FY Q4 and guidance: FY Q4: EPS up 10% 9/17/15: APD announces spinoff FY 2015: EPS of $6.57 up of Materials Technology 14%, despite 7% f/x busi
Slide 48: APD: Share Price Performance Since Inception
APD: Share Price Performance Since Inception APD stock increased 29% from our average cost to January 22, 2016 Stock price performance of APD from 5/22/2013 to 1/22/2016 7/23/14: Seifi hosts 10/30/14: APD 9/17/15: APD 160 first earnings call, announces announces spinoff of sole focus to create recor
Slide 49: Zoetis
Slide 50: Zoetis Inc.
Zoetis Inc. Split-off from Pfizer June 2013 ~$22bn 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 51: Zoetis Engagement
Zoetis Engagement February 4th, 2015 Agreement Board Composition On February 4th, 2015, Zoetis agreed to add Pershing Square investment team member Bill Doyle to the Zoetis board Additionally, on April 13th, Zoetis and Pershing Square agreed to name Allergan Executive Chairman Paul Bisaro to t
Slide 52: 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 53: Productive R&D and Business Development
Productive R&D and Business Development Zoetis maintains productive R&D and business development Received USDA conditional license for IL-31 for atopic dermatitis (first-of-its- kind antibody therapy) EU Approved Simparica, once monthly chewable treatment for canine fleas, ticks and sarcoptic
Slide 54: Strong Operational Performance
Strong Operational Performance 2014 revenue: $4.8 bn; Adjusted Diluted EPS $1.57 per share 2015 guidance: Revenue: $4.7 – 4.75 billion Adjusted Diluted EPS: $1.70 – $1.74 per share (compared to original EPS guidance of $1.61 – $1.68 provided in November 2014) In 2015, held then increased a
Slide 55: Zoetis: Share Price Performance in 2015
Zoetis: Share Price Performance in 2015 The total return for Zoetis shares was 12% in 2015 Stock price performance of Zoetis from 1/1/2015 to 12/31/2015 $60.00 6/25/15: Rumored Valeant bid $55.00 $50.00 ~$48 Stock price $45.00 $40.00 5/5/15:Announces Comprehensive $35.00 Operational Efficiency Initi
Slide 56: Zoetis: Share Price Performance Since Inception
Zoetis: Share Price Performance Since Inception ZTS stock increased 19% from our average cost to January 22, 2016 Stock price performance of Zoetis from 7/22/2014 to 1/22/2016 $60.00 $55.00 7/22/14: Pershing Square purchases first Zoetis shares at ~$33 $50.00 per share Stock price $45.00 $43 $40.00
Slide 57: Canadian Pacific
Slide 58: CP: Overview of the Business & Recent Trends
CP: Overview of the Business & Recent Trends CP’s business is diversified by freight and destination: Freight Mix (% of ‘15 Rev.) Destination Mix (% of ‘14 Rev.) International Intermodal, 9% US Grain, 8% U.S., 17% Domestic Intermodal, 11% Canadian Grain, 15% Global, 35% Forest Products, 4% Canada,
Slide 59: CP: Another Year of Great Progress
CP: Another Year of Great Progress CP’s remarkable transformation continued at an accelerated pace in 2015 Operating Ratio (“OR”) of 61% improved 370bps Approaching four-year OR target in first year OR result is second-best in industry CP repurchased ~8% of its shares at $203 CAD per share
Slide 60: CP Remains an Attractive Investment
CP Remains an Attractive Investment Recent macroeconomic concerns have caused CP’s shares to trade at a substantial discount to their intrinsic value 2016 guidance calls for an operating ratio below 59% and double-digit EPS growth Tailwinds to EPS growth from a lower share count, pensions, and f
Slide 61: CP: Share Price Performance in 2015
CP: Share Price Performance in 2015 The total return for CP shares was -20% in 2015 Stock price performance of CP from 1/1/2015 to 12/31/2015 (CAD) 7/21/15: Q2 earnings call highlights: 2% revenue decline; Operating Ratio improves 420 bps to 60.9%; EPS up 16% 11/18/15: CP Hunter Harrison not on
Slide 62: CP: Share Price Performance Since Inception
CP: Share Price Performance Since Inception CP stock increased 206% from our average cost to January 22, 2016 Stock price performance of CP from 9/22/2011 to 1/22/2016 (CAD) 260 10/2/14: Analyst Day details new four-year targets: 11/13/15: CP’s 10.5% revenue CAGR engages in 240 Operating ratio o
Slide 63: Restaurant Brands International
Restaurant Brands International
Slide 64: 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 65: 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: ~20% EBITDA growth before FX Impressive SSS growth at both Burger King (~6%) and Tim Hortons (+5%) Continued progress o
Slide 66: QSR: Share Price Performance in 2015
QSR: Share Price Performance in 2015 The total return for Restaurant Brands International shares was -3% in 2015 Stock price performance of QSR/BKW from 1/1/2015 to 12/31/2015 $45 $40 Share price $37 $35 $30 $25 Note: The performance of Restaurant Brands International’s share price is provided for i
Slide 67: QSR: Share Price Performance Since Inception
QSR: Share Price Performance Since Inception Restaurant Brands International stock has increased 123% from our average cost since it merged with Justice Holdings Stock price performance of QSR/BKW from 6/19/2012 to 1/22/2016 $45 $40 $35 $35 Share price $30 $25 $20 $16 $15 $10 Note: The performance o
Slide 68: The Howard Hughes Corporation
HE HOWARD HUGHES CO
Slide 69: Howard Hughes Corporation
Howard Hughes Corporation HHC was created by Pershing Square Formed so that certain GGP assets, whose full value would not be realized in a REIT, could receive recognition in the public markets and appropriate management attention Comprised of development assets, master planned communities, an
Slide 70: Howard Hughes Corporation (continued)
Howard Hughes Corporation (continued) HHC continued to enhance the value of its existing assets in 2015 Significant growth in NOI provides HHC with an increasing stream of recurring, high-multiple cash flows Run-rate NOI increased from ~$47m to ~$180m since 2010 Strong growth of condo sales re
Slide 71: HHC: Share Price Performance in 2015
HHC: Share Price Performance in 2015 The total return for Howard Hughes Corporation shares was -13% in 2015 Stock price performance of HHC from 1/1/2015 to 12/31/2015 $180 $160 Share price $140 $120 $113 $100 $80 Note: The performance of HHC’s share price is provided for illustrative purposes only a
Slide 72: HHC: Share Price Performance Since Inception
HHC: Share Price Performance Since Inception Since the spinoff from GGP in November 2010, the Howard Hughes Corporation stock has increased 165% Stock price performance of HHC from 11/5/2010 to 1/22/2016 $180 $160 $140 Share price $120 $100 $97 $80 $60 $40 $37 $20 $0 Note: The performance of HHC’s s
Slide 73: Platform Specialty Products
Slide 74: Platform Specialty Products Corporation
Platform Specialty Products Corporation 2015 was a challenging year for Platform Mixed performance in underlying business results Double-digit underlying EBITDA growth at MacDermid Slight underlying EBITDA growth in Ag before cost synergies Solid execution of cost synergies in Ag Reduction
Slide 75: 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 76: Platform: Share Price Performance in 2015
Platform: Share Price Performance in 2015 The total return for Platform shares was -45% in 2015 10/7/15: Reduces ’15 EBITDA guidance to Stock price performance of Platform from 1/1/2015 to 12/31/2015 $550-$570m due to change in ag 7/13/15: Announces 10/23/15: Announces distribution strategy acquisit
Slide 77: 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 decreased 22% Stock price performance of Platform from 5/16/2013 to 1/22/2016 10/3/14: Pershing Square purchases 9.4m additional PAH shares at $25.59 $30 increasing average co
Slide 78: Nomad Foods
Nomad Foods
Slide 79: Nomad Foods (NOMD)
Nomad Foods (NOMD) On June 1, 2015, Pershing Square invested $350mm in a private placement of Nomad shares at $10.50 in conjunction with Nomad’s acquisition of Iglo Group Pershing Square’s Brian Welch joined the Board of Nomad Nomad purchased Iglo, Europe’s leading frozen food business, for €2
Slide 80: NOMD: Share Price Performance
NOMD: Share Price Performance NOMD stock has increased 12% from our average cost to YE 2015, and decreased 14% to January 22, 2016 Stock price performance of NOMD from 1/1/2015 to 1/22/2016 24 8/13/15: Nomad announces agreement to acquire non-UK assets of Findus 11/16/15: Q3 results: 22 Revenue do
Slide 81: Fannie Mae & Freddie Mac
Slide 82: 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 and lower credit losses Reported results volatile due to non-cash accounting charges on derivatives used to h
Slide 83: Fannie Mae & Freddie Mac (GSEs) (continued)
Fannie Mae & Freddie Mac (GSEs) (continued) Misinterpretation of the recently passed Jumpstart GSE amendment contributed to GSEs’ share price decline Amendment prevents Treasury from selling or liquidating its $189bn preferred stock for two years except with Congressional approval Market is like
Slide 84: Fannie and Freddie: Share Price Performance in 2015
Fannie and Freddie: Share Price Performance in 2015 The total return for Fannie Mae and Freddie Mac shares was -20% and -21%, respectively, in 2015 Stock price performance of Fannie and Freddie from 1/1/2015 to 12/31/2015 $4.00 12/18/15: Jumpstart GSE included as an amendment to the FY2016 $3.50 App
Slide 85: Fannie and Freddie: Share Price Performance Since Inception
Fannie and Freddie: Share Price Performance Since Inception Since we began accumulating our positions in October 2013, Fannie Mae and Freddie Mac stock prices have decreased 37% and 35%, respectively, from our average cost Stock price performance of Fannie and Freddie from 10/4/2013 to 1/22/2016 $6.
Slide 86: Herbalife
Slide 87: 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 88: Herbalife: It's a Pyramid Scheme
Herbalife: It’s a Pyramid Scheme Vemma Complaint provides a potential road-map for Herbalife Herbalife could not survive if the courts applied the same restrictions to Herbalife which they have imposed upon Vemma. Pershing Square has published a detailed side-by-side comparison on our website –
Slide 89: Recent Financial Results Have Been Weak
Recent Financial Results Have Been Weak Financial results inflected in 2015; 2016 doesn’t look much better Revenue declined low-double-digits 2015’YTD as weak organic growth was met with substantial FX headwinds. China was – and continues to be – the single bright spot in Herbalife’s financial per
Slide 90: The Pyramid is No Longer Growing…
The Pyramid is No Longer Growing… Slowing 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 91: …Driven by Underlying Operational Drivers
…Driven by Underlying Operational Drivers Slowing growth in new Sales Leaders is weighing on Herbalife’s ability to recruit new members 0.4 25% ~ 0.37 Avg. Active Sales Leaders (mm) Growth in Average Active 0.32 0.35 Sales Leaders has slowed 0.3 0.28 20% meaningfully in recent YoY Growth (%) 0.23
Slide 92: Volume Growth is Negative
Volume Growth is Negative An average Herbalife recruit today purchase fewer volume points per year, further weighing on consolidated volume growth 1,750 10% New Members are 1,634 1,600 1,577 Increasingly Less 1,547 5% Volume Points YoY Growth (%) Valuable 1,500 1,414 ~ 1,330 0% 1,250 (5%) 1,000 (1
Slide 93: 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 94: Herbalife: Performance Since Short Inception
Herbalife: Performance Since Short Inception From the inception of our short position on May 1, 2012, HLF stock has increased 3%* from our average cost Stock price performance of HLF from 5/1/2012 to 1/22/2016 $85 $75 Stock price $65 $55 $47 $45 $46 $35 $25 5/1/2012 11/1/2012 5/1/2013 11/1/2013 5/1/
Slide 95: Exited Positions
Exited Positions
Slide 96: Position Exited in 2015: Allergan
Position Exited in 2015 = ALLERGAN
Slide 97: Allergan: Share Price Performance
Allergan: Share Price Performance The total return for Allergan shares was 89%* from our average cost basis prior to the position being made public, to the close of the transaction on March 17, 2015 Stock price performance of Allergan from 2/25/2014 to 3/17/2015 $240 8/22/14: Allergan shareholders d
Slide 98: Business & Organizational Update
Business & Organizational Update
Slide 99: Organizational Update
Organizational Update Steve Fraidin Vice Chairman William Ackman CEO & Portfolio Manager PUBLIC RELATIONS LEGAL & COMPLIANCE TRADING INVESTMENT TEAM FINANCE INVESTOR RELATIONS 1 1 i ! l L “Orecerat. Halit Coussin Ramy Saad William Doyle Nicholas Botta Tony Asnes Director of CLO &CCO Head Trader ” CF
Slide 100: Personnel Updates in 2015
Personnel Updates in 2015 Legal & Compliance Additions Vice Chairman Stephen Fraidin Joined Pershing Square in February 2015 Kirkland & Ellis LLP LL.B., Yale Law School A.B., Tufts University Senior Counsel Jenna Dabbs Joined Pershing Square in January 2015 United States Attorney’s Office, Southern
Slide 101: Personnel Updates in 2015 (continued)
Personnel Updates in 2015 (continued) Communications Addition Communications Associate Fran McGill Joined Pershing Square in April 2015 Rubenstein Associates B.S., Syracuse University Finance and Accounting Addition Assistant Controller/Management Co. Louisa Bender Joined Pershing Square in May 2015
Slide 102: Personnel Updates in 2016
Personnel Updates in 2016 Investment Team Departure Paul Hilal Investment Team Analyst Finance and Accounting Departure Priti Jajoo Controller 102
Slide 103: 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 104: 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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