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 2015)
67 slides from Pershing Square Holdings, Ltd. Public Class USD Accum.Shs's investor presentation, Apr 28, 2015
Slide 1: European Investor Meeting
European Investor Meeting April 28, 2015 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 2015 European Investor Meeting
Welcome to the 2015 European Investor Meeting 2015 YTD Fund Performance Review 2015 Portfolio Update PSH Update Team Q&A 2
Slide 4: 2015 YTD Performance Review
2015 YTD Performance Review
Slide 5: Pershing Square Holdings, Ltd. YTD Performance
Pershing Square Holdings, Ltd. YTD Performance Q1 2015 Net Returns 3.5% S&P 500 0.9% YTD 2015 Net Returns through 4/21/2015 5.9% S&P 500 2.5% Past performance is not necessarily indicative of future results. All investments involve the possibility of profit and the risk of loss, including the loss o
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 March 31, 2015 750.00% Pershing Square, L.P.: 700.00% 722.9% 650.00% 600.00% 550.00% 500.00% 450.00% 400.00% 350.00% 300.00% 250.00% 200.00% S&P 500: 134.3% 150.00% 100.00% 50.0
Slide 7: 2015 Q1 Winners and Losers (gross returns)
2015 Q1 Winners and Losers (gross returns) Winners PSH Losers PSH Allergan Inc 3.9% Actavis (AGN Hedge) (1.8%) Howard Hughes Corp 1.4% Herbalife (1.4%) Zoetis Inc 0.8% 7 Other Positions (0.4%) Air Products & Chemicals Inc 0.7% Platform Specialty Products 0.6% Total (3.6%) 5 Other Positions 0.8% Tota
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 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
Slide 9: Total Core Fund Assets Under Management
Total Core Fund Assets Under Management $ in millions 4/1/2015 AUM Pershing Square, L.P. $5,498 Pershing Square International, Ltd. $5,994 Pershing Square Holdings, Ltd. $6,835 Pershing Square II, L.P. $130 Pershing Square V Funds $567 Total Core Fund AUM $18,458 Total Firm AUM $19,025 *Pershing Squ
Slide 10: 2015 Portfolio Review
2015 Portfolio Review
Slide 11: Allergan
Slide 12: Allergan Inc.
Allergan Inc. At investment inception, ~$37bn market cap specialty pharmaceutical company Leader in aesthetics, dermatology, and ophthalmology In February 2014, Pershing Square formed JV with Valeant to assist in Allergan merger Between February 25th and April 21st, Pershing Square acquired
Slide 13: Allergan: Share Price Performance
Allergan: Share Price Performance Allergan shares increased 94% (including dividends) from inception of our position in February 2014, and 89% from our average cost basis prior to the position being made public, to close of the transaction* Stock price performance of Allergan from 2/25/2014 to 3/17/
Slide 14: Valeant
W VALEANT
Slide 15: Valeant Pharmaceuticals
Valeant Pharmaceuticals At investment inception, ~$54bn market cap specialty pharmaceutical company Leader in dermatology, ophthalmology, branded generics, and gastroenterology Pershing Square developed a strong relationship with Valeant during our 2014 partnership Pershing Square was prohib
Slide 16: We Have Historically Not Invested in Pharmaceutical Companies
We Have Historically Not Invested in Pharmaceutical Companies The traditional pharmaceutical company’s products are not durable, and growth is not predictable Patent cliffs for major products Huge investments in high-risk, low-return R&D to replace off-patent drugs Price pressure in many segme
Slide 17: Our Research Changed Our Opinion of Valeant
Our Research Changed Our Opinion of Valeant Despite our skepticism, we determined after extensive research that Valeant meets our investment criteria Durable products/brands Strong organic growth Culture of cost discipline and operational excellence Management compensation aligned with share
Slide 18: Valeant's Total Shareholder Return Since Pearson's CEO Appointment
Valeant’s Total Shareholder Return Since Pearson’s CEO Appointment An investment in Valeant shares on the day Mike Pearson became CEO has appreciated to 42x its initial value in seven years including dividend reinvestment Valeant total shareholder return from 2/1/2008 to 4/22/2015 4,500% 4,177% 2/22
Slide 19: Pershing Square's Investment in Valeant
Pershing Square’s Investment in Valeant Beginning in January 2015 we were free to acquire Valeant shares We bought our shares with the confidence of: Our extensive initial research of the company The validation of our work over the following year Increased conviction in management, following
Slide 20: Valeant: Share Price Performance
Valeant: Share Price Performance Valeant’s share price has increased 28% (including dividends) from inception of our position in February 2015, and 5% from our average cost basis prior to the position being made public, to date Stock price performance Valeant from 2/9/2015 to 4/22/2015 $220 2/22/15:
Slide 21: Canadian Pacific
Canadian Pacific
Slide 22: CP: Remarkable Transformation Continues
CP: Remarkable Transformation Continues 2014 results highlight continued rapid pace of transformation under Hunter Harrison and the reconstituted CP Board Annual earnings per share growth of 32% despite record winter conditions in Q1 and lingering industry-wide congestion Operating Ratio of 64
Slide 23: We Believe CP Remains an Attractive Investment
We Believe CP Remains an Attractive Investment Continued operational excellence is enhancing service and reliability while lowering CP’s cost to serve, which is driving an acceleration of revenue growth and a robust long-term outlook Transformation expected to remain rapid in 2015, with 2015 guida
Slide 24: CP: Share Price Performance Since Inception
CP: Share Price Performance Since Inception CP’s share price increased 429% (including dividends) since inception of our investment in September 2011, and 335% from our average cost basis prior to the position being made public, to date Stock price performance of CP from 9/22/2011 to 4/22/2015 (CAD)
Slide 25: Air Products
Slide 26: Air Products (APD): Investment Thesis
Air Products (“APD”): Investment Thesis High-quality, simple, predictable, free-cash-flow generative business Global oligopoly enjoys attractive returns due to local incumbency advantages driven by the high transportation costs of the product Stability: diversified, contracted, buffered from m
Slide 27: APD Has a New CEO with a Great Track Record
APD Has a New CEO with a Great Track Record In June 2014, Air Products appointed a new CEO, Seifi Ghasemi, who has a great track record of creating shareholder value Two decades as senior leader of industrial gas company BOC Last decade leading Rockwood, a specialty chemicals business o ROC TS
Slide 28: APD is Beginning a Significant Transformation
APD is Beginning a Significant Transformation APD has announced a plan to improve performance to industry- best levels Seifi’s plan to improve performance rests on five core principles: 1) Focus on the core 4) Control capital / costs 2) Restructure the organization 5) Align rewards 3) Change the c
Slide 29: APD: Share Price Performance Since Inception
APD: Share Price Performance Since Inception APD’s share price increased by 66% (including dividends) since inception of our initial investment in May 2013, and 59% from our average cost basis prior to the position being made public, to date Stock price performance of APD from 5/22/2013 to 4/22/2015
Slide 30: Zoetis
Slide 31: Zoetis Inc.
Zoetis Inc. $4.8bn 2014 revenue, largest manufacturer of medication for pets and livestock in the world ~$23bn equity market capitalization Split-off from Pfizer June 2013 Pershing Square began buying Zoetis shares on July 22nd 2014 and owns a 8.6% economic stake in the company Passes Pers
Slide 32: Zoetis Engagement
Zoetis Engagement Early Engagement Pershing Square publically announces 8.6% stake in Zoetis on November 11th, 2014 Shortly after announcing our position, we met with Zoetis management to learn more about their business and to present our analysis of the company We also engaged the Zoetis boar
Slide 33: Zoetis: Share Price Performance
Zoetis: Share Price Performance Zoetis’ share price has increased 44% (including dividends) from the inception of our position in July 2014, and 28% from our average cost basis prior to the position being made public, to date Stock price performance Zoetis from 7/22/2014 to 4/22/2015 7/22/14: Pershi
Slide 34: Howard Hughes
Slide 35: 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 36: HHC: Share Price Performance Since Inception
HHC: Share Price Performance Since Inception Since the spinoff from GGP in November 2010 and from our average cost basis prior to the position being made public, The Howard Hughes Corporation’s share price has increased 296% Stock price performance of HHC from 11/5/2010 to 4/22/2015 $180 $150 $160 $
Slide 37: Restaurant Brands International
Restaurant Brands International
Slide 38: Restaurant Brands International (Burger King)
Restaurant Brands International (Burger King) Leading global fast-food brands with a franchise-focused model 18,000+ fast-food units under Burger King and Tim Hortons brands Significant unit growth opportunity requires limited capital Control shareholder 3G is ideal operating partner and sponsor
Slide 39: QSR/BKW: Share Price Performance Since Inception
QSR/BKW: Share Price Performance Since Inception Restaurant Brands International’s share price increased 176% (including dividends) since it merged with Justice Holdings and from our average cost basis prior to the position being made public Stock price performance of QSR/BKW from 6/19/2012 to 4/22/
Slide 40: Platform Specialty Products
Slide 41: Platform Specialty Products Corporation
Platform Specialty Products Corporation Platform of “asset-light, high-touch” specialty chemicals businesses “Asset-light, high-touch” = high margins and switching costs, low capital intensity Experienced management team with demonstrated record of value creation Rich opportunity set for futur
Slide 42: Platform: Share Price Performance Since Inception
Platform: Share Price Performance Since Inception Since the IPO on the London Stock Exchange in May 2013 and from our average cost basis prior to the position being made public, Platform’s share price has increased 201%, including the attached warrants associated with the offering Stock price perfor
Slide 43: Fannie Mae and Freddie Mac
Slide 44: Fannie Mae & Freddie Mac (GSEs)
Fannie Mae & Freddie Mac (GSEs) GSEs are vital to the U.S. mortgage market Provide credit guarantee for $5 trillion of U.S. mortgages 80-year history of providing widespread and affordable access to 30-year, fixed-rate, prepayable mortgage No credible alternative to the GSEs Net Worth Sweep is
Slide 45: 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 share prices have increased 84% and 86%, respectively. From our average cost basis prior to the position being made public, Fannie Mae and Freddie Mac sha
Slide 46: Herbalife
Slide 47: Herbalife: It's a Pyramid Scheme
Herbalife: It’s a Pyramid Scheme All facts continue to confirm that Herbalife is a pyramid scheme Video obtained of a meeting of corporate executives and top distributors discussing ‘a level of inauthenticity’ in the business Current Chairman’s Club member Stephan Gratziani: “Who wants to bring
Slide 48: Herbalife: Timeline of Events
Herbalife: Timeline of Events HLF shares appreciated by 143% including dividends in 2013… Stock price performance of HLF from 1/1/2013 to 12/31/2013 11/20/13: Stiritz $85 10/28/13: HLF converts to 1/9/13: Third reports 3Q13 13D filer 7/31/13: Soros Point discloses 2/14/13: Icahn earnings $79 $75 rev
Slide 49: Herbalife: Timeline of Events (cont.)
Herbalife: Timeline of Events (cont.) From its high of $82 in January 2014, Herbalife’s stock price declined 52% in 2014 due to, among other things, regulatory investigations, public scrutiny, deterioration of the business and earnings Stock price performance of HLF from 1/1/2014 to 12/31/2014 $85 1
Slide 50: Herbalife: Performance Since Short Inception
Herbalife: Performance Since Short Inception From the inception of our short position on May 1, 2012, HLF stock declined by 13% (including dividends), and from our average cost basis prior to the position being made public, HLF stock increased 4%; extreme volatility persists Stock price performance
Slide 51: Operating Performance has Turned the Corner
Operating Performance has Turned the Corner Organic operating performance has begun to deteriorate led by Herbalife’s most mature markets Q4 Volume Points YoY Growth Comparison (%) Worldwide Volume Points YoY Growth Over Time (%) Q4 15% 13% 13% 2013A 2014A ∆ 9% 10% YoY Volume Points Growth (%) North
Slide 52: Herbalife: Running Out of Options
Herbalife: Running Out of Options HLF took on substantial leverage in 2014 to fuel an aggressive buyback program and bolster its falling share price. With a $1B credit facility maturing in March 2016, Herbalife has fewer options today Enterprise Value Decline $9,000 $8,000 $7,000 $6,000 $5,000 $4,00
Slide 53: PSH Update
PSH Update
Slide 54: Pershing Square Holdings, Ltd.
Pershing Square Holdings, Ltd. On December 31, 2012, we launched Pershing Square Holdings, Ltd. (“PSH”) with approximately $2.2B Private fund NAV prior to IPO had grown to $3.1B largely through capital appreciation An additional $212mm of investor capital rolled over from Pershing Square Internation
Slide 55: Pershing Square's Rationale for PSH
Pershing Square’s Rationale for PSH The stability of PSH’s capital enhances Pershing Square’s ability to successfully execute its investment strategy Reduces the need to manage cash for potential redemptions Allows for increased percentage of capital to be invested in core strategy Expands Per
Slide 56: PSH – IPO Summary
PSH – IPO Summary Goals Results Exceed $3B in NAV pre-IPO Reached $3.1B pre-IPO Minimum IPO size of $1B Raised ~$2.8B at IPO IPO within 4 years of initial private IPO on 10/1/14, 21 months after launch phase launch PSH total net assets as of 12/31/14 Significant scale to achieve liquidity $6
Slide 57: PSH – Structure at Listing
PSH – Structure at Listing PSH Private Phase / Rollover Private Phase Initial Public Offering $3.0bn NAV conversion Cornerstone and Public Raise during IPO $2.8bn PS International Rollover $212.5mm Pershing Square Holdings, Ltd. $6.2bn NAV Management Management Private Phase Investor IPO Purchases (
Slide 58: PSH – Offering Characteristics
PSH – Offering Characteristics New vs. Existing Investors IPO Buyers by Type IPO Buyers by Region 57
Slide 59: PSH Price Per Share
PSH Price Per Share Pershing Square Holdings, Ltd. NAV as of March 31, 2015 Value Shares Price/ Share Pershing Square Holdings Public Shares NAV $ 6,555,110,630 240,128,546 $27.30 Pershing Square Holdings Management Shares NAV 237,566,945 8,500,796 $27.95 Pershing Square Holdings VoteCo NAV 173,807
Slide 60: PSH Stock Price VS NAV
PSH Stock Price VS NAV PSH’s share price is currently trading at a 5% discount to NAV PSH price performance from 10/14/2014 to 4/21/2015 $29.00 $28.00 $27.94 $27.00 $26.49 $26.00 Per Share Value $25.00 $24.00 $23.00 $22.00 $21.00 $20.00 10/14/14 10/21/14 10/28/14 11/04/14 11/11/14 11/18/14 11/25/14
Slide 61: Historical Weekly Trading Volume
Historical Weekly Trading Volume PSH’s broker-traded volume is double the exchange-traded volume at 68% vs 32% PSH historical weekly trading volume from 10/24/2014 to 4/17/2015 14,000 12,000 10,000 Shares (thousands) 8,000 Weekly average: 5.8m shares Daily average: 1.2m shares 6,000 4,000 2,000 - 10
Slide 62: PSH Broker Trading Volume
PSH Broker Trading Volume Total Dollars Traded Broker Ranking Broker Name Total Shares Traded at VWAP 1 Deutsche Bank 38,992,526 $ 947,703,253 2 Merrill Lynch 14,308,872 347,773,431 3 (DEXC) DEXION CAPITAL PLC 9,283,367 225,629,832 4 (CSFB) CREDIT SUISSE 8,658,144 210,433,949 5 JP Morgan 5,834,069 1
Slide 63: Team
Team
Slide 64: 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 65: 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 64
Slide 66: Questions and Answers
Questions and Answers
Slide 67: 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
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