Ackman & # 39; s Pershing Square Unveils $ 900 Million In Starbucks

NEW YORK (Reuters) – Ackman said Tuesday that its activist hedge fund, Pershing Square Capital Management LP, had created a $ 900 million position in Starbucks Corp.SBUX.O), betting on the world's largest coffee chain can overcome the stagnant sales of its domestic market.

Ackman unveils a 1.1% stake in Starbucks as the Seattle-based company tries to convince investors that it can withstand strong competition from its rivals, including fast-food chains and high-end cafes. Last month, he announced a reorganization involving executive changes and job losses.

While activist shareholders are known to have quarrels with CEOs and corporate councils, Mr. Ackman on Tuesday launched a conciliatory tone by unveiling Pershing Square's investment at the 2018 Grant's Fall Conference in New York.

Ackman said the recent actions of Kevin Johnson, who succeeded Howard Schultz as CEO of Starbucks last year, were "encouraging" and that the recent challenges of Starbucks are "solved through proper execution by from the management ".

Ackman welcomed the revaluation of Starbucks' portfolio, the closure of Teavana stores, the revitalization of its licensed and licensed businesses, cost reduction initiatives and a $ 19 billion three-year share buyback program.

"We look forward to continuing a successful dialogue with Mr. Ackman, as we do with all of our shareholders," Starbucks said in a statement. Pershing Square declined to comment further.

Starbucks shares rose 5.5% on news and closed up 2.1% to $ 57.71 on Tuesday. The shares remained unchanged this year, while the index .SPX of the S & P 500 index rose 8%.

In its presentation titled "Doppio" – a reference to a double shot of espresso – the price of Starbucks stock could more than double over the next three years if the company achieves its goals.

Pershing Square has built its stake in Starbucks over the past three months, according to people close to the case. It was not known immediately if Pershing Square had had discussions with Starbucks before revealing its position.

Ackman has made a name in the world of activist shareholders as a passionate advocate for his positions. He even sometimes burst into tears while defending his bets on companies such as Herbalife Nutrition Ltd (HLF.N) and Target Corp (TGT.N).

After three years of losses on Pershing Square, Ackman has adopted a low profile that seems to be paying off: its hedge fund has risen 13.8% in the first nine months of the year. The average hedge fund gained less than 2% over the same period.

This is partly because Akman has managed to turn his previous losses into victories. Last year he lost a power of attorney contest against payroll processing company Automatic Data Processing Inc. (ADP.O), but the company's recent strong performance has boosted its portfolio.

Pershing Square, which manages $ 8.4 billion in assets, also unveiled its positions this year in Nike Inc. (NKE.N), United Technologies Corp. (UTX.N) and Lowe's Companies Inc (LOW.N). None of these investments gave rise to a public battle and Pershing Square has already left Nike.

Historically, only one or two of the more than a dozen Ackman positions have turned into public fights that make the headlines, such as the bet against Herbalife or its efforts to save drug maker Valeant, which cost him billions of dollars. of dollars.

Ackman also has experience in the food retailing sector, after investing in McDonald's Corp. (MCD.N) more than 10 years ago and in Chipotle Mexican Grill Inc (CMG.N) more recently.