May 2, 2014 / 3:38 PM / 4 years ago

UPDATE 2-Pershing Square sits on hefty gains in Allergan bet

(New throughout, adds data from filing)

By Svea Herbst-Bayliss and Tim McLaughlin

BOSTON, May 2 (Reuters) - William Ackman’s Pershing Square Capital Management is already sitting on a $1.2 billion gain above his trading costs on his bet on Botox-maker Allergan Inc , according to a filing made on Friday.

Allergan shares are now trading about 34 percent above Pershing Square’s average trading costs per share, according to U.S. regulatory filings.

Ackman, one of the hedge fund industry’s most widely watched investors, has acquired 28.9 million shares of Allergan, mostly through call option exercises and forward purchase contracts.

The gain cements a dramatic comeback for Ackman and his $13.6 billion fund after a bruising 2013 where losses on J.C. Penney and Herbalife weighed on returns.

Late last month, Ackman disclosed that the trade amount on most of that stock was $3.2 billion, or $126.54 per share. That reflects more than $1 billion gain on Allergan shares, which traded at $169.45 on Friday.

Ackman is working with Valeant Pharmaceuticals International Inc to buy the Botox maker. Two weeks ago, Pershing Square first said it held a nearly 10 percent stake.

On Thursday, the Federal Trade Commission gave Pershing Square clearance to finalize the transactions. The Hart-Scott-Rodino Act requires that investors notify the FTC and the Justice Department’s antitrust division before making acquisitions of voting securities. Usually there is a 30-day waiting period before the transactions can be finalized. In this case the hedge fund received permission to proceed within two weeks of making its original filing on April 21.

Allergan reacted to Valeant’s unwanted $47 billion takeover bid by adopting a so-called poison pill that essentially prevents Pershing Square from acquiring more than the 9.7 percent stake it already has. If the fund were to cross the 10 percent threshold, other investors would be allowed to buy discounted shares.

By announcing that Pershing Square was working with Valeant as a group, the activist fund essentially jump-started the process of waiting for a catalyst to push the stock price higher, making it a model that other hedge fund managers said might be tried again.

Other hedge funds, including Citadel, Viking Global Investors and Highfields Capital, have also been recent buyers of Allergan stock, according to ThomsonReuters data.

The gain was reflected in Pershing Square’s strong performance returns when the fund told investors that its flagship fund was up roughly 19 percent this year. (Reporting by Svea Herbst-Bayliss and Tim McLaughlin; Editing by Lisa Von Ahn, Steve Orlofsky and David Gregorio)

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