Published On: Thu, Aug 1st, 2013

Bill Ackman’s Pershing Square Capital makes their largest investment to date $2.2 billion – and it’s all on air

Activist investor Bill Ackman’s has acquired a 9.8 percent position in $22 billion value industrial gas production company Air Products. The stake, valued at around $2.2 billion is the largest investment in his company’s history. And it could have been even more.

Bill Ackman facebook Bill Ackman / Getty

/ By Albert Hecht /

 In early July William Ackman sent a letter to his investors in Pershing Square Capital stating that he was in the process of building up what he planned to be a major position in what he described as large-cap, investment-grade U.S. corporation, even hinting that the company in his cross hairs was of the type of company that the legendary investor Warren Buffet would be liable to invest in.

That was enough to send waves of speculation on which company Ackman was looking at , with eventually the slightly more savvy investors homing in on Air Products & Chemicals to give them their full title ,  snapping up enough shares to push values up from the around  the early $90 market to close above the $105 before the announcement finally broke.

 Now Ackman is becoming increasingly aware of the fact that if he had not sent out the circular to his shareholders in which he may have given out “too much information” Pershing Square’s share in Air Products would have been more considerable.

The reason why that is someone in Air Products also got wind of what was in the air, probably after being alerted on the unusually high volumes of stock trading. The plan gives existing shareholders the right to accumulate deeply discounted n and immediately what is known as “poison pill” tactic designed to prevent a single investor from acquiring shares to the value of more than 10 per cent in the company.

With Pershing Square Capital’s holding has been restricted to 9.8 percent it doesn’t mean that the board at Air Products will not be having their trepidations of what Bill Ackman plans to do with the Pennsylvania-based company, but they will almost certainly be studying the moves that he when he acquired a 14 per cent stake in railroad company Canadian Pacific Railway in 2011.

Almost immediately after taking his stance on Canadian Pacific, Ackman embarked on a proxy war with the existing management which ended with him winning majority control of the board, bringing in his own management team and succeeding to drive the railroad to profit levels that were higher than they had been for several years.

The acquisition of shares in Air Products comes at a time when Ackman has been enjoying some mixed fortunes, with last year’s investments in Herb life stock, yet to “ bear fruit” On the upside as well as the Ackman masterminded turnaround at Canadian Pacific, Pershing Square Capitalfinally beginning to see some light at the end of the tunnel on their investments in J.C. Penney, after his self admitted strategic blunder in hiring Ron Johnson, who he later dismissed after convincing Myron Ullman to return to the company, after he too was fired by Ackman .

A spokesperson for Air Products announced that it is company policy to maintain an active dialogue with shareholders and carefully considers their views, going on to add that they had yet to be contacted by Pershing Square Capital.

“Air Products welcomed new investors and looked forward to engaging with Bill Ackman and his team at Pershing Square Capital to understand their views, whilst including in their message a hinted reminder that the company has always taken significant, proactive steps in to deliver earnings and operating cash flow growth whilst operating in very challenging economic environment. “ The company statement went on to point out.

Founded in 1940, Air Products is the world’s largest hydrogen and helium producer, with a market value of around $22 billion and annual turnovers of $9.61 billion.  Air Products are active in a wide range of worldwide industrial sectors, industrial energy, technology and healthcare markets, through their ability to supply with a unique portfolio of atmospheric gases, process and specialty gases, performance materials, and equipment and services.

In addition Air Products is the largest producer of dry ice and nitrous oxide in the United States, where it also holds the third largest share in the safety products market.

When asked for his opinion on Air Products, Ackman replied that he thinks that it is a great business with few real competitors, a very diverse customer and product base, high barriers to entry, and substantial pricing power,  that has been consistently  undervalued. “We have some ideas on how to add value.” Ackman added.

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