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 2018)
58 slides from Pershing Square Holdings, Ltd. Public Class USD Accum.Shs's investor presentation, Jan 29, 2018
Slide 1: London Investor Meeting
London Investor Meeting January 29, 2018 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: Agenda
Agenda Chairperson’s Introduction 2017 PSH Performance Review Business & Organizational Update Current Portfolio Update PSH Discount Management Q&A 3
Slide 4: Chairperson’s Introduction
Chairperson’s Introduction
Slide 5: Board of Directors of PSH
Board of Directors of PSH All are independent of Manager other than Nick Botta Anne Farlow – Chairperson Richard Battey Nicholas Botta Lord Jonathan Kestenbaum William Scott 5
Slide 6: PSH Board Process
PSH Board Process Quarterly in-person meetings, telephonic meetings as needed Review investment performance and portfolio Review operational risk management Shareholder register Investor relations update Expenses Any regulatory matters Additional matters 6
Slide 7: PSH Board Independence
PSH Board Independence Management Engagement Committee Charter on website All directors other than Nick Botta Monitor and evaluate Manager’s compliance with Investment Management Agreement Review continuing appointment of Manager Review compensation of Manager Review performance of oth
Slide 8: 2017 PSH Performance Review
2017 PSH Performance Review
Slide 9: Pershing Square Holdings, Ltd. Annual Net Returns
Pershing Square Holdings, Ltd. Annual Net Returns Since 1/1/2013 Year PSH S&P 500 2013 9.6% 32.4% 2014 40.4% 13.7% 2015 (20.5%) 1.4% 2016 (13.5%) 11.9% 2017 (4.0%) 21.8% Past performance is not necessarily indicative of future results. All investments involve the possibility of profit and the risk o
Slide 10: Cumulative Net Returns Since Inception (1/1/04)
Cumulative Net Returns Since Inception (1/1/04) Pershing Square, L.P. Net Returns vs. S&P 500 through December 31, 2017 750% 700% 650% Pershing 600% Square, L.P.: 550% 493.6% 500% 450% 400% 350% 300% S&P 500: 250% 220.8% 200% 150% 100% 50% 0% (50%) Past performance is not necessarily indicative of f
Slide 11: Long-Term Performance in Up & Down Markets
Long-Term Performance in Up & Down Markets Pershing Square, L.P. Net Returns vs. S&P 500 (1/1/2004 through 12/31/2017)(1) Average Monthly Average Return in Average Return in Return Up Months Down Months 4.0% 3.0% 2.7% 2.4% 2.0% 1.2% 0.8% 1.0% 0.0% (1.0%) (2.0%) (1.5%) (3.0%) (4.0%) (3.5%) Pershing S
Slide 12: 2017 Winners (Gross Returns)
2017 Winners (Gross Returns) Winners PSH Restaurant Brands International 5.2% Automatic Data Processing Inc 3.5% Howard Hughes Corp 1.6% Nomad Foods Limited 1.3% Hilton Worldwide 0.9% Nike, Inc. 0.8% Accretion(1) 0.4% All Other Positions 0.9% Total Winners 14.6% Past performance is not necessarily i
Slide 13: 2017 Losers (Gross Returns)
2017 Losers (Gross Returns) Losers PSH Herbalife (4.0%) Mondelez International (3.5%) Fannie Mae & Freddie Mac (3.3%) Chipotle Mexican Grill (2.7%) Allergan Litigation Reserve (1.3%) Valeant Pharmaceuticals (1.0%) All Other Positions (1.4%) Total Losers (17.2%) Past performance is not necessarily in
Slide 14: 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%) Pershing Square Holdings, Ltd. 2011 2.5% (2.1%) 2012 16.9% 1.1% Long Short/Hedge 2013 25.8
Slide 15: Total Assets Under Management
Total Assets Under Management $ in millions 12/31/2017 AUM Pershing Square Holdings, Ltd. $4,243 Pershing Square International, Ltd. 2,090 Pershing Square, L.P. 1,852 Pershing Square II, L.P. 74 Total Core Fund AUM $8,259 PS VI Funds (ADP Co-Investment Vehicle) 510 Total Firm AUM $8,769 Assets under
Slide 16: Business & Organizational Update
Business & Organizational Update
Slide 17: Returning to Our Roots
Returning to Our Roots We have created a strong path forward that reminds us of our early roots Restructured to a smaller investment-centric organization Growth will come from returns, not asset gathering More efficient and impactful team will strengthen the firm’s culture Reinforced our cor
Slide 18: Evolution of Pershing Square Organization
Evolution of Pershing Square Organization Despite stability in the size of the investment team, total headcount grew by over 50% from 2012 to 2016 as PSH was launched and capital increased $20,000 800% Valeant $18,000 challenges 69 70 Launched PSH begin 700% $16,000 IPO on Euronext 58 600% PSLP Cumu
Slide 19: New Organizational Design
New Organizational Design 19
Slide 20: Organizational Realignment
Organizational Realignment While Pershing Square will continue its highly transparent approach, Bill will no longer spend time on day-to-day IR matters Investors will hear directly from Bill and the rest of the investment team in quarterly conference calls and letters along with annual investor
Slide 21: Pershing Square’s Core Investment Principles
Pershing Square’s Core Investment Principles Key Business Characteristics Simple, predictable, free-cash-flow-generative business Formidable barriers to entry Limited exposure to extrinsic factors that we cannot control Generally, low financial leverage levels Minimal capital markets depen
Slide 22: Pershing Square’s Core Investment Principles (Cont.)
Pershing Square’s Core Investment Principles (Cont.) Attractive Valuation Fair price “as is,” but a substantial discount to optimized value Base case valuation not reliant on future M&A or platform value Good Management & Governance In-place or identified management with high degree of integri
Slide 23: Pershing Square’s Core Investment Principles (Cont.)
Pershing Square’s Core Investment Principles (Cont.) Occasional Mispriced Probabilistic Investments Must offer highly asymmetric return to compensate for possibility of permanent loss of capital Limited to investments within our circle of competence Will represent a small percentage of fund ca
Slide 24: New Idea Generation was Robust in 2017
New Idea Generation was Robust in 2017 In 2017, Pershing Square established multiple investment positions that reflect our core investing principles Leading HCM services firm with a strong market position in an attractive industry and a substantial margin improvement opportunity Premier hotel br
Slide 25: New Idea Generation was Robust in 2017 (Cont.)
New Idea Generation was Robust in 2017 (Cont.) We established a full-sized position in ADP and in the undisclosed position, but were unable to acquire a full-sized position in our other new ideas as their prices increased significantly amidst a rapidly rising stock market Price Increase from Start o
Slide 26: Investment Team Update
Investment Team Update Ali Namvar will retire in March 2018 to pursue his long-standing creative and entrepreneurial interests Ali will join the Pershing Square Advisory Board and continue to serve on the Chipotle board as a Pershing Square representative He will remain an investor in the fund
Slide 27: Investment Team Bios
Investment Team Bios Career Joined Employee Education and Summary Prior Experience Experience PSCM (Years) William Ackman Gotham Partners, Co-founder and Portfolio Manager (1992 - 2003) CEO / Portfolio M.B.A., Harvard Business School, 1992 28 2004 Manager A.B., Harvard College, magna cum laude, 1988
Slide 28: Experienced, Aligned, and Well-Incentivized Team
Experienced, Aligned, and Well-Incentivized Team Reduced size of organization allows for competitive compensation for staff and partners Continued large ratio of assets to investment team and overall organizational size Introduced long-term incentive plan in 2017 Increased profits interests
Slide 29: Now is a Uniquely Attractive Time to Be an Investor in Pershing Square
We Believe Now is a Uniquely Attractive Time to Be an Investor in Pershing Square Experience is making mistakes and learning from them We have reaffirmed the core investment principles that drove our returns since inception Our idea generation engine is intact Our fee arrangement is highly f
Slide 30: Current Portfolio Update
Current Portfolio Update
Slide 31: Automatic Data Processing (“ADP”)
Automatic Data Processing (“ADP”) ADP is a high quality, simple, predictable, free-cash-flow generative business ADP participates in an attractive industry with robust secular growth Recent developments have confirmed elements of our investment thesis U.S. tax reform will drive a ~13-15% incre
Slide 32: ADP: Share Price Performance Since Inception
ADP: Share Price Performance Since Inception ADP’s share price including dividends has increased 18% from our average cost at announcement date to January 19, 2018 ADP share price performance from 5/10/2017 to 1/19/2018 $125 11/7/17: ADP shareholder vote $121 $120 $115 7/27/17: Rumors of PSCM’s invo
Slide 33: Restaurant Brands International (“QSR”)
Restaurant Brands International (“QSR”) QSR remains an attractive investment opportunity despite significant share price appreciation in 2017 Continued Strong Business Performance Net unit growth of 6% at Burger King and 4% at Tim Hortons Margin enhancement from continued efficiencies and Popeye
Slide 34: QSR: Share Price Performance Since Inception
QSR: Share Price Performance Since Inception QSR’s share price including dividends has increased 300% (4.0x) from our average cost since it merged with Justice Holdings to Jan. 19, 2018 QSR share price performance from 6/19/2012 to 1/19/2018 $70 $62 $60 1/7/16 – 1/8/16: Pershing Square purchases $50
Slide 35: Mondelez International (“MDLZ”)
Mondelez International (“MDLZ”) We believe there are clear catalysts for an upward revaluation of MDLZ as key investor concerns that emerged last year are addressed Today, MDLZ trades at 18x our estimate of 2018 earnings per share Slight discount to S&P 500 despite high business quality, secular
Slide 36: 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 January 19, 2018 MDLZ share price performance from 3/30/2015 to 1/19/2018 $49 8/6/15: Pershing Square files initial 13D $47 6/16/17: Amazon announces a
Slide 37: Howard Hughes Corporation (“HHC”)
Howard Hughes Corporation (“HHC”) HHC continues to create value across its portfolio of core trophy real estate assets Strong condo sales at HHC’s 60-acre Ward Village coastal development in Hawaii with 93% of its existing condo inventory sold or under contract Seaport District on track for gran
Slide 38: HHC: Share Price Performance Since Inception
HHC: Share Price Performance Since Inception HHC’s share price has increased 250% (3.5x) from the November 2010 spinoff from GGP to January 19, 2018 HHC share price performance from 11/9/2010 to 1/19/2018 $170 $150 $130 $128 Share price $110 $90 $70 $50 $37* $30 11/9/10 11/9/11 11/9/12 11/9/13 11/9/
Slide 39: Chipotle Mexican Grill (“CMG”)
Chipotle Mexican Grill (“CMG”) We believe Chipotle represents a highly attractive turnaround opportunity On November 29, Chipotle announced a search for a new CEO and the transition of founder Steve Ells to Executive Chairman The Board of Directors is committed to recruiting a world-class CEO
Slide 40: CMG: Share Price Performance Since Inception
CMG: Share Price Performance Since Inception CMG’s share price has declined 15% from our average cost at announcement date to January 19, 2018 CMG share price performance from 8/4/2016 to 1/19/2018 $500 12/16/16: CMG announces four new 11/29/17: CMG directors added to its now 12-person board, announ
Slide 41: Fannie Mae (“FNMA”) and Freddie Mac (“FMCC”)
Fannie Mae (“FNMA”) and Freddie Mac (“FMCC”) Fannie and Freddie are trading near our average cost despite significant positive developments since our initial investment We believe that any proposal for housing finance reform must satisfy the following conditions in order to succeed Simplicity to
Slide 42: FNMA and FMCC: Performance Since Inception
FNMA and FMCC: Performance Since Inception FNMA and FMCC share prices have decreased 3% and 1%, respectively, from our average cost at announcement date to January 19, 2018 FNMA and FMCC share price performance from 10/7/2013 to 1/19/2018 $6 5/5/14: Pershing Square 12/21/17: Letter presents investme
Slide 43: Platform Specialty Products Corporation (“PAH”)
Platform Specialty Products Corporation (“PAH”) Strong business performance in 2017 9% organic EBITDA growth due to revenue growth and cost savings Performance Solutions grew 12% and Ag Solutions grew 5% Refinanced ~$4bn of debt, significantly lowering interest expense Valuation remains at a d
Slide 44: PAH: Share Price Performance Since Inception
PAH: Share Price Performance Since Inception PAH’s share price has increased 13% from its IPO on the London Stock Exchange to January 19, 2018 PAH share price performance from 5/16/2013 to 1/19/2018 $30 $25 5/17/13: Pershing Square purchases 25mm PAH 12/16/15: PAH Share price $20 shares at $10 appoi
Slide 45: NIKE, Inc. (“NKE”)
NIKE, Inc. (“NKE”) NIKE is a high quality business that should compound long-term earnings at a high rate due to strong revenue growth and margin expansion One of the world’s most iconic brands and the market leader in the athletic footwear and apparel industry Dominant market position creates f
Slide 46: NKE: Share Price Performance Since Inception
NKE: Share Price Performance Since Inception NKE’s share price including dividends has increased 29% from our average cost to January 19, 2018 NKE share price performance from 10/12/2017 to 1/19/2018 $70 $67 $65 Share price $60 10/25/17: NIKE holds an Investor Day $55 $52 $50 10/12/17 10/27/17 11/11
Slide 47: Herbalife Ltd. (“HLF”)
Herbalife Ltd. (“HLF”) We have converted our short position in Herbalife to in-the-money put options that represent ~2% of capital across the funds(1) Herbalife’s financial performance has deteriorated significantly in recent years Despite the company having repurchased ~33% of outstanding share
Slide 48: HLF: Share Price Performance Since Inception
HLF: Share Price Performance Since Inception HLF’s share price has increased 60% including dividends from our average cost at announcement date to January 19, 2018 HLF share price performance from 5/1/2012 to 1/19/2018 $90 3/12/14: 5/17: FTC Settlement Herbalife 7/15/16: FTC Complaint and takes lega
Slide 49: Exited Positions
Exited Positions
Slide 50: S&P Global Inc.
S&P Global Inc. S&P is an annuity-like business with pricing power, strong secular growth and a margin opportunity Premier credit ratings and financial data services firm Credit ratings comprise ~55% of EBIT and data services ~45% of EBIT Credit ratings is a great business Credit ratings are
Slide 51: Other Positions Exited in 2017
Other Positions Exited in 2017 Undisclosed Position 51
Slide 52: PSH Discount Management
PSH Discount Management
Slide 53: PSH Discount History
PSH Discount History PSH Discount to NAV 13 October 2014 – 25 January 2018 August 2015 VRX Decline Begins Discount narrows to ~14% •2017 YTD Performance through Summer 2017 May 4.3% performance •LSE listing reversal •Expected FTSE index inclusion •5% share buyback announced Tender Announced Jan 2018
Slide 54: PSH Discount Management Steps - 2017
PSH Discount Management Steps - 2017 In May 2017, PSH was listed on the Main Market of the London Stock Exchange, alongside Euronext Amsterdam, with the objective of widening the pool of prospective investors and increasing liquidity To date, PSH’s average daily trading volume has increased by o
Slide 55: PSH Discount Management Steps - 2018
PSH Discount Management Steps - 2018 In January 2018, PSH and PSCM announced a potential tender offer by PSCM Acquisition Co LLC (affiliates of PSCM) for up to $300 million of PSH Increases alignment with shareholders (i) represents substantial incremental investment by management, and (ii) fees
Slide 56: Questions & Answers
Questions & Answers
Slide 57: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results The performance results of PSH and Pershing Square, L.P., the Pershing Square fund with the longest performance track record, funds included in this presentation are presented on a gross and net-of-fees basis. Gross and net performance include
Slide 58: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results With respect to MDLZ, "average cost" does not account for the unwinds of certain of the equity forwards and subsequent purchases of call options on July 29, 2015 and August 5, 2015 (see trading exhibit in our August 6, 2015 13D filing). In rela
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