Ackman buys into Chipotle, to talk to management; shares jump

Tue Sep 6, 2016 10:33pm EDT
 
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By Svea Herbst-Bayliss

BOSTON (Reuters) - Activist investor William Ackman's hedge fund took a 9.9 percent stake in fast-casual Mexican food chain Chipotle Mexican Grill Inc CMG.N, buying in after the once high-flying company was battered by food-safety issues.

The billionaire manager said in a regulatory filing late on Tuesday that the company's shares, which closed at $414.07 on Tuesday, were undervalued and that he would be speaking with management.

Chipotle's shares rose as much as 8.7 percent to $450 in extended trading after Ackman's Pershing Square disclosed its ownership of 2.9 million shares in the company.

Chipotle said it learned of Pershing Square’s acquisition only on Tuesday, welcomed their investment, and appreciated the confidence they had expressed in the company.

Chipotle was tied to E. coli, salmonella and norovirus outbreaks last year and its shares tumbled 42 percent over thelast 52 weeks. And in July, Mark Crumpacker, its chief creative and development officer, was arraigned on charges of possession of cocaine. The company put him on leave.

Chipotle marks the first addition to Pershing Square Capital Management's highly concentrated portfolio in nearly a year and at a time the firm is still deep in the red after years of winning performance. A spokesman for Ackman declined to comment beyond the firm's filing.

The investment in Chipotle puts the company squarely into the path of one of the industry's most powerful investors who has often handpicked chief executive officers and joined corporate boards to try and guide turnarounds.

Last month Pershing Square, which oversees $12 billion for pension funds and other wealthy investors, sold off the remainder of its investment in railway Canadian Pacific (CP.TO: Quote), freeing up some $1.5 billion.   Continued...

 
A Chipotle Mexican Grill is seen the day before it announces its first quarter results, in Los Angeles, California, United States, April 25, 2016. REUTERS/Lucy Nicholson