UPDATE 5-Ackman's Pershing Square takes $2.2 bln stake in Air Products

Wed Jul 31, 2013 6:09pm EDT
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* Stake is Ackman's largest-ever investment by value

* Air Products shares up 3.5 percent

By Svea Herbst-Bayliss, Swetha Gopinath and Ernest Scheyder

BOSTON/NEW YORK July 31 (Reuters) - Hedge fund manager William Ackman unveiled his biggest bet ever on Wednesday, a $2.2 billion play on Air Products & Chemicals Inc that the billionaire trader kept secret for two months.

The activist investor's Pershing Square Capital Management now owns 9.8 percent of the industrial gas maker, making it the company's biggest shareholder. Pershing Square might have bought even more, but Air Products adopted a "poison pill" defense to prevent a takeover after some on Wall Street began wondering whether the company might be in Ackman's sights.

Speculation mounted earlier this month that Ackman, who tends to make only a few concentrated bets at a time, was laying the groundwork for something big when he set out to raise as much as $1 billion to invest in a company that he called strong but lagging its peers and declined to name.

Pershing Square began buying Air Products stock in early June and Ackman said in a filing that he believes the company to be "undervalued" and an "attractive investment."

In some ways, Air Products may look a little like Canadian Pacific Railway, which the hedge fund also described as a rock solid company that was woefully underperforming.

In the 21 months since Ackman took on Canada's second-largest railway with a $1.4 billion investment, he got seven new directors elected to the board, replaced the chief executive and scored one of his biggest investment successes, making some $2 billion in profit in less than two years.   Continued...