Bill Ackman’s bet on Air Products is his biggest investment ever

July 31, 2013
July 31, 2013

Activist investor Bill Ackman of Pershing Square is having a busy year. His latest target is chemical company Air Products, and it’s Ackman’s biggest investment ever, at $2.2 billion.

Ackman hasn’t disclosed what he plans to do with Air Products, but he told CNBC that Air Products was a “[Warren] Buffett-like business.” That means Ackman may make moves to try to improve Air Products’s operations, possibly through new management. His 9.8% stake makes him one of the company’s 20 largest shareholders. The stock went up 3.5% on the news.

Ackman could repeat what he did at Canadian Pacific, a railroad company in which he gained a majority of board seats through a proxy fight. He also recruited a new CEO, which has been a successful move: The company’s shares rose as a result.

But Ackman has had less success with management changes at retailer JC Penney. He brought in former Apple stores head Ron Johnson, who got rid of JC Penney’s popular discounts. Johnson left the company earlier this year and JC Penney brought back his predecessor, Mike Ullman.

Another troubled Ackman investment is nutritional products firm Herbalife, which reported better-than-expected earnings yesterday. Ackman has accused Herbalife of being a pyramid scheme without real customers. Rival activist investor Carl Icahn has taken the other position on Herbalife, going long on the investment.

For weeks, the market had been guessing about Ackman’s latest investment after he said in a letter to his investors that he was looking to raise a new $1 billion fund to target a company. Stocks of FedEx and other companies went up because of speculation they could be Ackman’s target.

Air Products already sensed a week ago that something was afoot after it noticed high volumes of its stock being traded. The company adopted a defensive measure, known as a “poison pill,” that makes it more expensive to acquire more than a 10% stake.

One company that is probably gleeful about Ackman’s move is Airgas, which was the target of a failed hostile bid from Air Products. Air Products dropped its bid in 2011 after a court validated the poison pill that Airgas had adopted to thwart the move.

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