Pershing Square Goes Activist on Fortune Brands (FO) ~ market folly

Monday, October 11, 2010

Pershing Square Goes Activist on Fortune Brands (FO)

Bill Ackman's hedge fund Pershing Square Capital Management has apparently got the activist itch with his latest slew of 13D filings with the SEC. Due to portfolio activity on October 4th, 2010, Ackman disclosed a 10.9% ownership stake in Fortune Brands (FO) with 16,668,636 shares. This is a brand new position.

The hedge fund also has exposure to 603,486 notional shares of common stock via cash-settled total return swaps. This brings their aggregate economic exposure in FO to 17,272,122 shares (or an 11.3% stake in the company). This comes immediately after Pershing Square disclosed a new activist position in JC Penney (JCP) as well.

Ackman's hedge fund started acquiring shares of FO as early as July 12th around $40-41 per share. Shares of the company are already trading north of $55, with a recent 7% gain due to the news of Ackman's activist involvement. Overall, Pershing paid in excess of $764 million for their position in Fortune Brands. The 13D filed with the SEC is filled with the typical jargon regarding an activist position, so expect Ackman to work with management, etc. You can see the full extent of Pershing's FO trades here.

Without a doubt, Ackman's investment style centers on making few, concentrated bets and then monitoring them very closely (and in the two most recent cases, going activist). We'll have to wait and see what he has in store for his latest two plays, but you can bet he'll be talking about at least one of them tomorrow at the Value Investing Congress. To see the rest of Ackman's investments, head to our newsletter: Hedge Fund Wisdom.

Taken from Google Finance, Fortune Brands is "a holding company with operating companies engaged in the manufacture, production and sale of distilled spirits, home and security products, and golf products."

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