Pershing Square Capital Management, the hedge fund headed by activist investor Bill Ackman, acquired a stake in Mondelez International based on its 13D filing with the Securities and Exchange Commission (SEC).
The filing showed that Pershing Square Capital owns 120,265,238 shares or 7.5% stake in Mondelez International. The hedge fund’s stockholding is worth around $5.5 billion.
Pershing Square believes Mondelez is undervalued
Pershing Square Capital believed that Mondelez International is an attractive investment, and its common stock is undervalued.
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The hedge fund plans to engage in discussions with the board of directors, management and stockholders of the company regarding its business operations, financial condition, strategic plans and other issues including potential acquisitions, merger, divestitures or a sale.
Last year, Mondelez CEO Irene Rosenfeld implemented measures to improve its operational performance by implementing aggressive cost cutting such as shutting factories.
Pershing Square Capital is now the largest shareholder of Mondelex International. A person briefed in the hedge fund’s investment said Mr. Ackman sees a value in Mondelez brands, which include Ritz Crackers, Peek Freans, and Chicklets. He also liked the company’s cost-cutting initiatives.
Mondelez aims to reduce $3.5 billion in costs by the end of 2018 and to achieve an adjusted margin of around 15% to 16% next year.
Pershing Square may push Mondelez to sell itself
Some analysts believe that Pershing Square Capital will push Mondelez International to improve its earnings or to sell itself
In a note to investors, JP Morgan analyst Ken Goldman commented, “We suspect Mr. Ackman’s primary goal is to have Mondelez sold.” He added that Mondelez already started improving its operations. He said, “We think many of the low-hanging Oreos already have been plucked.”
Nelson Peltz of Trian Fund Management owns 3% stake in the company. He pressured the management of Mondelez International to cut expenses. He also suggested Mondelez to merge with the Frito-Lay snack business of Pepsico, but abandon the idea after joining the board of directors of the company.
The stock price of Mondelez International is down nearly 2% to $45.95 per share at the time of this writing.