Here is the link for the latest issue from Columbia Business School.
Featured are Warren Buffett, Mohnish Pabrai and Bill Ackman
FULL ISSUE. PDF
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Tag: ackman
Bill Ackman just sent a letter to shareholders of Longs Drug (LDG) in regards to his effert to find another buyer for them as an alternative to the CVS (CVS) offer, now that Walgreen’s (WAG) has backed out. There was none…full letter below
Disclosure (“none” means no position):none
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@VIC Bill Ackman Press Conference
Here is the audio of Bill Ackman’s press conference at the Value Investing Congress. If you are an investor of any type, you must listen to it..
The questions are hard to hear (that does not matter) but Ackman’s answers are very clear and great stuff. For me, this was the highlight of the conference. Ackman was very gracious with his time answered questions on all subject for over an hour. I was able to ask him about short selling disclosure, Borders (being on the board he opted not to answer), and why hedge funds have such a lousy reputation.
He talks about AIG (AIG), Wachovia (WB), Citi (C), Wells Fargo (WFC), the SEC, Treasury, the Fed, the “Bailout”, Longs Drug (LDG), Walgreen’s (WAG), CVS (CVS), Borders (BGP), Barnes and Noble (BKS).
Disclosure (“none” means no position):Long BGP, WFC, C, none
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@ VIC: Us Value Folks Are Funny People
Some reflection on the past few days and the Value Investing Conference.
Friday the Dow hit 10,700, today it hit 9,200. People are scared. People are panicking. TV folks are ashen with fear. CNBC’s Jim Cramer is running around in a panic telling everyone to “sell everything”. Hank Paulson is on TV trying to reassure people. McCain and Obama are in a debate battling over who has the best “consumer bailout” plan.
Yet, a constant theme was observed at the Value Investing Congress. Disbelief. Not in that equity values were evaporating, but that securities people have wanted to buy reached buying targets in only a matter of days.
Bill Ackman said, “we are buying heavily”. Whitney Tilson said, “we are buying hand over fist”. Leon Cooperman said, “America is on sale”. Several money managers I spoke to, (they and their activity will remain nameless until they disclose it, it is not my place to do so) were practically laughing at the prices they were buying equities at. Despite a 14% drop in the Dow in 48 trading hours, this was a very happy group of people.
Why?
Simple. Markets were are in today happen perhaps once a century. We are in a state of almost paralyzing fear. What does Berkshire’s Warren Buffett say about fear? “Buy it”. Talk to anyone you know and they want to yank all their money out of the market. Let me ask you this. Why? Until you actually sell a stock, any loss or gain you have is only theoretical. It fluctuates day by day. Once you pull the sell trigger you then have actually lost or gain money. Why cement a loss now unless you believe the value of American business will continue to decline in perpetuity. It won’t, so if that is true, your imaginary losses today will decrease and perhaps become gains down the road.
Back to the conference….
I spoke to countless people at the conference and there were two themes…
– Nobody was selling anything…
– Everyone had bought something (including me)..
There was no signs of anxiety or panic. People were relaxed, joking and trading “can you believe “x” is selling for that?” stories.
It was my first conference and I plan on being a regular at future ones. As I think about what would make these folks (and myself) begin to attend with apprehension and be a bit nervous sitting there my mind flashed back to 1999 and 2000. Stratospheric valuations would make us value folks nervous sitting there because if history tell us anything…..there is a reckoning coming.
Disclosure (“none” means no position):None
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@ VIC Bill Ackman on Wachovia
Bill Ackman spoke at the Value Investing Congress on Wachovia (WB), Wells Fargo (WFC)and Citi (C).
* Outcome determined based on which transaction creates most value for shareholders
who will decide by majority vote
* Wachovia Board of Directors will pursue highest-value/highest-certainty transaction
* Citi transaction value uncertainty is largely due to limited disclosure about Pro Forma Wachovia Corp. This is easily addressed through additional disclosure
* Wachovia never filed an 8-K detailing the terms of the Citi transaction and providing a pro forma income statement and balance sheet as well as a detailed schedule of assets of Pro Forma Wachovia Corp. SEC requires companies to file an 8-K
detailing material agreements within four business days
* In order to increase transaction certainty, Citi may propose to acquire all of the
Holding Company at a higher per-share price than WFC or team up with another buyer who will acquire Pro Forma Wachovia Corp at a higher price than Wells Fargo
* Wells Fargo would likely increase its offer or buy Pro Forma Wachovia Corp along
with selected branch and bank assets
* Pro Forma Wachovia Corp will give buyer/merger partner an industry-leading
position with a nationwide brokerage network and asset management franchise
* Pro Forma Wachovia Corp has no debt, $9.8 Billion of non-cumulative perpetual
preferred and substantial cash and tax refund assets which allow for a stock buyer to make a highly capital-accretive transaction
* Pro Forma Wachovia Corp will have additional tax attributes that can shelter
future income or gain
* These attributes make Pro Forma Wachovia Corp particularly attractive to
Morgan Stanley and Goldman Sachs, for they are now deposit-taking institutions that will seek to deleverage and would benefit from the Wachovia Securities broker, financial advisor, and deposit-gathering network
* With cash, tax attributes, cash-generative operating businesses, and non
-cumulative perpetual liabilities, Pro Forma Wachovia Corp is also an ideal
investment vehicle (think Berkshire Hathaway)
But what about the “exclusivity” agreement with Citi? Ackman said the following language from the Bailout Bill destroyed it.
Remember where Wachovia CEO Bob Steel worked before his current job? Treasury.
The hidden gem here is the brokerage business:
So, what does Ackman value the parts and shares at?
Here is Ackman on CNBC talking about the tax issue:
Ackman gave a press conference after I attended and answered questions for over an hour. More on that later.
Disclosure (“none” means no position):
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@VIC notes
Some notes from day 1
* Housing: the worst is still to come. The pick a pay mortgage crunch will surpass subprime in 2010 and 2011
* Natural gas has been talked about by two speakers so far
* Ackman answered question (including some from yours truly) for over an hour at a press conference after his talk. Good stuff
* Mosaic (Mos) and Potash (pot) were pushed by John Burbank who has grown $ forty percent for over a decade
More later
Thank you,
Todd Sullivan
Sent from my BlackBerry® wireless device
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Pershing Files13D/A in Borders
Here is the latest on Pershing and Borders (BGP)
This calculation is based on 75,238,934 shares of common stock of Borders Group, Inc. This figure is based on 60,538,934 shares of Common Stock outstanding as of August 29, 2008 as reported in its quarterly report on Form 10-Q for the quarterly period ended August 2, 2008 and warrants covering 14,700,000 shares of Common Stock described in Item 4.
This Amendment No. 8 (this “Amendment No. 8”) amends and supplements the statement on Schedule 13D, as amended to date (the “Schedule 13D”), by (i) Pershing Square Capital Management, L.P., a Delaware limited partnership (“Pershing Square”), (ii) PS Management GP, LLC, a Delaware limited liability company (“PS Management”), (iii) Pershing Square GP, LLC, a Delaware limited liability company (“Pershing Square GP”), (iv) William A. Ackman, a citizen of the United States of America and (v) BGP Holdings Corp. (collectively, the “Reporting Persons”), relating to the common stock (the “Common Stock”) of Borders Group, Inc., a Michigan corporation (the “Issuer”). Unless otherwise defined herein, terms defined in the Schedule 13D shall have such defined meanings in this Amendment No. 8.
As of October 1, 2008, as reflected in this Amendment No. 8, the Reporting Persons are reporting beneficial ownership on an aggregate basis of 25,297,880 shares of Common Stock (approximately 33.62% of the outstanding shares). This includes warrants covering 14,700,000 shares of Common Stock, which represents 9,550,000 warrants received on April 9, 2008 (as previously disclosed) and an additional 5,150,000 warrants (as further described below in Item 4). The Reporting Persons own cash settled, total return equity swaps covering 4,805,463 notional shares of Common Stock (as previously disclosed). The notional shares that underlie such swaps are not included in the totals set forth in the charts earlier in the Schedule 13D. The aggregate economic exposure of the Reporting Persons to shares of Common Stock, including the aggregate shares of Common Stock beneficially owned by the Reporting Persons plus the aggregate notional shares underlying such swaps, represents approximately 40.1% of the sum of the outstanding shares of Common Stock and the shares of Common Stock underlying such warrants.
Item 4. Purpose of Transaction
Item 4 is hereby supplemented, as follows:
On October 1, 2008, Pershing Square received from the Issuer warrants to purchase 5,150,000 shares of Common Stock at $7.00 per share for a term of 6.5 years, in accordance with the terms of the Warrant Agreement referred to in Item 6, which is filed as Exhibit 99.3 hereto and is incorporated herein by reference.
Full Filing
Disclosure (“none” means no position):Long BGP
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FOR IMMEDIATE RELEASE:
October 03, 2008
WILLIAM ACKMAN TO SPEAK ABOUT PERSHING SQUARE'S INVESTMENT IN WACHOVIA
Presentation at Value Investing Congress this Monday
New York, NY – William Ackman will speak about Pershing Square Capital Management's investment in Wachovia (NYSE: WB) on Monday, October 6, 2008 at the 4th Annual Value Investing Congress.
Date: Monday, October 6, 2008
Time: 11:40 a.m.
Place: Rose Theater
Frederick P. Rose Hall
Home of Jazz at Lincoln Center
Time Warner Center, 5th Floor
(Columbus Circle at West 60th Street)
Thank you,
Todd Sullivan
Sent from my BlackBerry® wireless device
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Ackman Owns 9% of Wachovia
From Bloomberg
William Ackman’s Pershing Square Capital Management LP bought a 9 percent stake in Wachovia Corp., now valued at $1.2 billion, according to a person with direct knowledge of the purchase.
The shares were acquired following Citigroup Inc.’s (C) Sept. 29 agreement to buy the bank and before Wells Fargo & Co. (WFC) announced a rival offer today, said the person, who declined to be identified because the purchases haven’t been publicly disclosed.
The purchase inserts Ackman, 42, into the latest skirmish in the credit crisis, a pitched battle over Wachovia’s (WB) deposits and branches after the Charlotte, North Carolina-based company went to the brink of collapse
Full Article\
Disclosure (“none” means no position):None
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This is getting good…
From the SEC filing
Longs Drug Stores Corporation (“Longs”) (NYSE: LDG) today announced that the Federal Trade Commission (the “FTC”) has requested that Longs provide the FTC with documents and information in connection with Walgreens’ (NYSE, NASDAQ: WAG) unsolicited, non-binding expression of interest to acquire Longs. In the detailed 25-page request, the FTC stated that it was investigating whether Walgreens’ proposed acquisition of Longs “may substantially lessen competition among Retail Pharmacies in various portions of California, Nevada and Hawaii.” In addition, the FTC requested information regarding several markets that had not been examined in the FTC’s previous review of the proposed Longs-CVS transaction, including Longs’ operations in Hawaii and Longs’ mail order business. The FTC may add to the request as its investigation progresses. Longs intends to cooperate in the FTC’s investigation.
Here is a time-line of events between Walgreen’s and Longs.
Also, Walgreen (WAG) CEO Jeffery Rein sent the following letter (letter below) the Longs CEO Warren Bryant
Dear Mr. Bryant:
We have carefully reviewed your September 17th letter and are disappointed with your unwillingness to discuss our proposal. We continue to believe that our proposal is a “Superior Proposal” or, at a minimum, represents a “bona fide Acquisition Proposal” that “will lead to a Superior Proposal,” as defined in the Agreement and Plan of Merger, dated August 12, 2008, with CVS Caremark Corporation (CVS). It is clear that your stockholders agree. As you have been unwilling to speak with us, we have no option but to address the points raised in your September 17th letter in this letter. In your September 17th letter, you take the position that Walgreens is not willing to accept the inherent regulatory risks in connection with an acquisition of Longs. This statement is not accurate. We are confident that the combination of Longs and Walgreens would receive all required regulatory approvals in a reasonable period of time and do not believe that anything even approaching the threshold of divestitures that we already have agreed to in our proposal would be required. We believe that your advisors would agree with this conclusion. If there is any confusion, we want to make clear that our commitment to divest covers the stores and assets of both Longs and Walgreens. We also believe that your position overstates the significance of this concern, as the outcome of the FTC process will be apparent before you would terminate your agreement with CVS.
We also believe that you have significantly overstated the regulatory risk. The retail pharmacy business is highly competitive. Upon consummation of the proposed transaction, the combined Walgreens/Longs will account for less than 35% of the retail pharmacies in almost every metropolitan area where the two companies both participate. In the few areas where the combined share of stores would exceed 35%, it would do so by only a small margin, and additional competitive influences, such as mail order, competition from health plan pharmacies and the potential for new entry and expansion by existing competitors should ensure that those areas remain highly competitive. In that regard, CVS has recently announced plans to expand in several parts of Northern California, independent from the Longs transaction, further eroding current market shares in those areas.
We believe that the regulatory review process will be successfully completed without undue delay for several reasons: (1) our team is already working with the FTC and has been from the first day that our proposal was announced, (2) the FTC is familiar with Longs, having completed a process recently in connection with the CVS transaction, (3) if necessary, we are prepared to discuss remedies with the FTC at an early stage, and (4) we are working closely with our real estate and operating partners on a parallel process to provide any necessary solution or remedy. In order to address any divestitures that may be required, we have partnered with experienced real estate investors. Our real estate partners have significant experience in your markets and have a strong track record of success in partnering in strategic transactions. Klaff Realty, LP (“Klaff”) is a privately owned real estate investment company based in Chicago, Illinois that engages in the acquisition, redevelopment and management of commercial real estate throughout the United States. To date, Klaff and its partners have acquired portfolios in excess of 112 million square feet of retail and office properties with a value in excess of $6 billion and its current portfolio of properties consists of approximately over 40 million square feet of retail space and distribution centers across the United States. Lubert-Adler Management Company, L.P. (“Lubert-Adler”) is a real estate private equity firm specializing in acquisitions and redevelopments through joint ventures with local operating partners. Since its inception in 1997, Lubert-Adler has invested in over $15 billion of real estate assets.
Over the last several years, Klaff and Lubert-Adler (collectively, “KLA”) have co-invested, in some cases as members of a consortium, in a number of very significant acquisitions. These include a portion of the Albertsons privatization ($2.3 billion acquisition of 661 stores including in-store pharmacies), Cub Supermarkets in the Chicago market ($25 million acquisition of 25 stores including in-store pharmacies), Shopko ($1.2 billion acquisition of 204 stores) and Rex Stores ($83 million acquisition of 87 stores). As a direct example, KLA and its partners successfully operated Albertsons and then sold certain stores to other first-class operators, such as Save Mart in Northern California and Publix in Florida. In New Mexico, the consortium acquired additional stores and expanded Albertsons’ footprint. In addition to their broad retail investment experience, we have chosen KLA as a partner due to the depth of the west coast and drug store management team that will work with Walgreens. Each of Klaff and Lubert-Adler have significant experience working with operating partners and we continue discussions with additional potential operating partners. With respect to the proposed transaction, KLA has agreed, subject to due diligence, to acquire Longs or Walgreens stores and other assets that may be required to be divested to obtain the required regulatory approvals for the transaction.
In your September 17th letter, you argue that Walgreens is not proposing to compensate Longs stockholders for any potential delays in consummating a transaction with Walgreens. Our $75.00 per share cash offer is superior to the CVS transaction. Relative to the CVS offer of $71.50 per share, our $75.00 proposal will return a higher value to Longs’ stockholders and the fact that they will continue to receive dividend payments will mitigate the impact of the time required to obtain the required regulatory approvals. As indicated in our initial proposal, we are prepared to agree to terms and conditions that are at least as favorable to Longs stockholders as those in the CVS merger agreement.
You should have no concern with our ability to finance the proposed transaction. Walgreens is highly rated from Standard & Poor’s and Moody’s, has a strong balance sheet and has sufficient liquidity and access to the necessary capital required to consummate the proposed transaction. We have had discussions with our financing sources and we are confident in our ability to secure committed financing prior to Longs terminating the merger agreement with CVS and entering into an agreement with Walgreens.
Our proposal is compelling—it would deliver superior value to Longs stockholders relative to the CVS transaction and can be consummated without undue delay. We again request that we be given an opportunity to conduct customary due diligence pursuant to the terms of your agreement with CVS as soon as possible. Although we would unquestionably prefer to work directly with you to complete a negotiated transaction, we are prepared to take our transaction directly to your stockholders. We are available to meet with you and your advisors as soon as possible to discuss our proposal and to answer any of your questions. We, as well as KLA, are prepared to commit all necessary resources to quickly complete due diligence and negotiate a mutually acceptable agreement.
Between Pershing’s Bill Ackman, Walgreen’s and now the FTC, Longs is going to have to explain to shareholders in the end why they turned down a superior offer.
Disclosure (“none” means no position):None
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Longs Dismisses Higher Walgreen’s Offer
Ok, has managament at Longs Drugs (LDG) never heard of Bill Ackman?
Market Watch Reports:
Longs Drug said its board won’t have negotiations or provide due diligence materials Walgreen was seeking. It also said Walgreen (WAG) has given no assurances the deal will be completed as it gave no timetable. Walgreen on Friday told Longs it was looking to offer $75 a share, subject to additional due diligence. Walgreen said it was “confident” it could secure antitrust approvals and had hired two real estate investment firms to handle potential store sales.
“We are disappointed with the refusal of the Longs board to discuss our superior proposal,” Walgreen said in a statement. “We remain committed to pursuing our proposal, which we believe creates superior value for our respective stockholders.”
This should be criminal. Longs has nothing to lose in negotiating with Walgreen. Why? the CVS tender offer is a one year deal. That gives Longs one year to find a better offer. In that time they could assure Walgreen can complete the deal and run it by the FTC.
Longs has rejected shareholder attempts to look at the company’s lease agreements. Now, Ackman’s Pershing has an economic interest in 26% of Long’s shares. How can you deny someone who has 26% of the stock a look at the books? How?
When did the interest of management trump the rights of stockholders as owners? This is as blatant an example as I have seen. One can argue about golden parachutes and their legitimacy all day but to deny a 26% owner a look at the leases of the company he owns, it should be illegal.
At least one thing will come of this. The next letter Ackman fires off the Long’s will be a classic. I’ll have it for you as soon as I get it.
Disclosure (“none” means no position):none
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So, just a day after Bill Ackman claims CVS’ (CVS) offer for Longs Drugs (LDG) is too low and that he “has other interested parties”, they begin to emerge.
The WSJ Reports:
Walgreens said it would pay $75 a share in cash to buy the California-based Longs, besting CVS’s price of $71.50 per share, also in cash, which was equivalent to about $2.7 billion. Either deal would also include the assumption of about $200 million in debt.
Walgreens CEO Jeffrey Rein said in a letter to Longs’ board of directors that the company would prefer to negotiate with Longs directly but was also prepared to take the offer directly to the company’s shareholders.
Rein also noted in the letter, which Walgreens disclosed in a press release late Friday, that Walgreens had expressed an interest in acquiring Longs earlier for $70 a share but never received due diligence materials from the company.
What annoys me the most is that I was actually going to do the “Ackman Longs Trade” discuss Thursday on Monday, it would have been a nice 4.5% in a day….would have been..
Like I have said here countless times, timing is indeed everything and I missed out on this one.
Disclosure (“none” means no position):
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Bill Ackman, who has an economic interest in 26% of Longs Drugs (LDG) shares says the CVS (CVS) offer is insufficient and is getting his own buyers. The CEO of CVS answers his claim this morning on CBNC.
From the Letter:
We and our financial advisor are pursuing alternative transaction partners for the Company. We have identified four potential buyers including two separate strategic buyers, a REIT and a real estate private equity investor, each of which we believe is interested in pursuing an alternative transaction with the Company. Some of these parties have been identified in the press while others have not. We are confident that the Company and its advisors would view each of these parties as bona fide and will recognize each as having the willingness and ability to pay substantially more than $71.50, including any lawful break-up fee, in addition to a substantial premium to shareholders.
While we can give no assurance that any party will come forward with an offer, the likelihood of such an event would materially increase if interested parties have more time to do their work and if the Company appropriately responds to inquiries that could lead to one or more superior offers.
Fortunately, given the tender offer’s 66 2/3% minimum tender condition, the Board has empowered shareholders to act on their own behalf by choosing not to tender into the offer at this time. Moreover, given the put right described above, shareholders retain the optionality to sell at a later date and get paid dividends while they wait.
While the terms of the Transaction limit the Company’s ability to fully re-open the auction process, Pershing Square and Blackstone are not limited from seeking higher and better offers. We are continuing to do just that. Blackstone will carry on its efforts to encourage potentially interested parties to approach the Company with alternative transactions. We are hopeful that, if such parties move forward with alternative transaction proposals, the Company’s Board of Directors and its advisors will welcome the opportunity for a better deal.
We will update you with our progress within 45 days. Please feel free to call me if you have any questions.
On CNBC today the CEO of CVS answered Ackman’s comments from yesterday. Here is what Ackman said:
Now, the CVS CEO’s answer:
It is unfortunate that neither CVS or CNBC seemed to be aware of the Ackman letter from yesterday. Perhaps the discussion would have been more accurate had they been aware of the other potential buyers?
No matter who you believe here is the really sad part of this whole thing. Ackman, whether you admire or despise him is doing the very job the Board of Directors and the CEO of Long’s should have done, maximize the potential value for shareholders.
The more I see stuff like this the more I start to lean toward the camps of people who want more shareholder rights and control…and I don’t even have any skin in this particular game.
Disclosure (“none” means no position):None
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Ackman Sends Letter to Longs Board
Bill Ackman says the CVS (CVS) offer for Longs Drug(LDG) is way too low.
Says Ackman:
“With owned real estate of $1.3 billion and leased full service real estate of $1.6 billion, the Company’s real estate assets alone are worth $2.9 billion, or approximately $71.50 per share. In effect, CVS is buying Longs’ real estate and is getting its PBM business and retail operations for free.”
Disclosure (“none” means no position):None
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Ackman on Lehman/Fannie /Freddie (video)
This is an interesting discussion as Ackman says the Treasury has not totally solved the problem at Fannie (FNM) or Freddie (FRE). In the second video, the general consensus is that Lehman (LEH) “is not Bear Sterns (BSC)”.
Video 1:
Video 2:
Disclosure (“none” means no position):none
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