Ackman's Pershing Square sees big payoff from Allergan deal

Wed Nov 26, 2014 10:11am EST
 
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By Svea Herbst-Bayliss

BOSTON (Reuters) - Hedge fund mogul William Ackman told investors they could see a $6 billion payday when he closes the chapter on Allergan Inc., his firm's biggest bet of 2014.

One week after Allergan agreed to sell itself to rival Actavis Plc., Ackman wrote in his quarterly investment letter that his Pershing Square Capital Management, the Botox-maker's biggest investor, still owns 26.6 million shares.

At the end of the third quarter Ackman's $18 billion fund owned 28.87 million Allergan shares, a regulatory filing showed.

While this isn't the deal the activist investor originally wanted - he had been pushing since April for rival Valeant buy Allergan - it will be lucrative all the same.

"If we hold the shares until transaction closure, we will receive $3.4 billion in cash and 9.81 million shares of Actavis worth $2.6 billion at current value," the letter said.

Currently Pershing Square's stake is worth $5.64 billion and the stock was trading at a $15.70 discount to the transaction value, which translates into about a 19 percent annualized return assuming the deal closes next April.

Ackman's firm is having one of its best years ever with a 35 percent gain for the year through the end of October. The average hedge fund has gained only 2 percent and the broader S&P 500 index has gained about 13 percent.

The battle for Allergan has captivated Wall Street for months, with Pershing Square waging court battles and finally winning a special meeting where it planned to replace many Allergan directors. Speculation has mounted recently over what Ackman planned to do with his holding, especially after he announced a stake in animal health company Zoetis Inc two weeks ago.   Continued...

 
William Ackman speaks to the audience   in New York, July 22, 2014. REUTERS/Eduardo Munoz