TCI Fund Boosts Canadian Pacific Railway Stake

Sir Chris Hohn's TCI Fund management has filed an amended 13G with the SEC regarding its position in Canadian Pacific Railway (CP).  Per the filing, TCI Fund now owns 7.62% of the company with over 10.56 million shares as of August 23rd. 

This is up from the previous 10.15 million shares they owned at the end of June.  TCI has bought CP shares for seven consecutive quarters and their stake is now worth almost $2.5 billion.  They originally initiated the position in the first quarter of 2018.

It should also be noted that Hohn's firm also owns stakes in other railroads, such as Canadian National (CNI ~ $1.75 billion worth) and Union Pacific (UNP ~ $800 million worth), but their stake in CP is the most sizable.

Per Yahoo Finance, Canadian Pacific Railway "owns and operates a transcontinental freight railway in Canada and the United States. The company transports bulk commodities, including grain, coal, potash, fertilizers, and sulphur; and merchandise freight, such as energy, chemicals and plastics, metals, minerals and consumer, automotive, and forest products. It also transports intermodal traffic comprising retail goods in overseas containers. The company offers rail and intermodal transportation services through a network of approximately 12,500 miles serving business centers in Quebec and British Columbia, Canada; and the United States Northeast and Midwest regions. Canadian Pacific Railway Limited was founded in 1881 and is headquartered in Calgary, Canada."

TCI Fund Goes Activist on Altaba, Calls For Liquidation

Sir Christopher Hohn's investment firm TCI Fund Management has filed a 13D with the SEC regarding its position in Altaba (AABA).  They now own 9.7% of the company with 79.77 million shares.

They've been slowly selling shares throughout the first three months of the year, presumably to stay below the 10% ownership cap as AABA has been buying back stock.


TCI Goes Activist on Altaba

The big development here, is that they've converted their 13G into a 13D and gone activist.  They're calling for a liquidation of the company, which owns big stakes in Alibaba (BABA) and Yahoo Japan.

Hohn sent a letter to Altaba, detailed below:

"As you know TCI is the largest shareholder of Altaba owning close to 10% of the company. We have very much appreciated your efforts to create shareholder value. We fully agree with your explicit goal of narrowing the wide discount to net asset value at which Altaba continues to trade.However, we believe that the current strategy of Altaba is unlikely to materially reduce this discount. A clear plan of liquidation is now necessary. This should involve a complete distribution or sale of all of Altaba’s Alibaba and Yahoo Japan shares.We attach a presentation for the Board and shareholders of Altaba laying out in summary our proposed plan of liquidation. We strongly believe that the vast majority of Altaba’s shareholders would be supportive of this plan.We have today converted our SEC filing to a 13D so that we may engage actively with you, the Board of Altaba and all shareholders to create the best outcome for all parties. We look forward to engaging with you constructively as you consider our proposal."

TCI's Presentation on Altaba

Hohn's firm also published a presentation on AABA and we've embedded it below.

TCI Fund Trims Altaba Stake (AABA)

Sir Christopher Hohn's TCI Fund Management (The Childrens Investment Fund) has filed an amended 13G and a Form 4 with the SEC regarding its stake in Altaba (AABA).  Per the filing, TCI now owns 9.99% of AABA with 84,709,952 shares.

The Form 4 indicates they sold 750,000 shares at a weighted average price of $74.2795 on January 18th, and another 464,000 shares at weighted price of $74.0791 on January 19th.  Perhaps this transaction was possibly made to keep them below the 10% ownership threshold, though that's purely speculation on our part.

Altaba is the former Yahoo stub that was left after the company was sold to Verizon (VZ).  Altaba is basically a collection of ownership stakes in the likes of Alibaba (BABA), Yahoo Japan, etc.  The thesis has been that the company was trading at a discount to its NAV and that management would look to close the gap or monetize the stakes in a tax efficient manner.

As of the end of the third quarter of 2017, AABA was TCI's largest US holding worth almost $6 billion.  Given the run-up in AABA shares since then, this stake is likely worth even more.  However, there's no way to know if TCI has hedged out this play in anyway, as some other funds involved in the trade have shorted BABA shares to offset the exposure.

Per Yahoo Finance, Altaba "operates as a non-diversified, closed-end management investment company in the United States. Its assets consist primarily of equity investments, short-term debt investments, and cash. The company was formerly known as Yahoo! Inc. and changed its name to Altaba Inc. in June 2017."

TCI Fund's Presentation on Safran / Zodiac

Sir Christopher Hohn's hedge fund firm TCI Fund Management has put together a campaign trying to block Safran's takeover of Zodiac.

TCI has owned Safran for 5 years and as of the date of the letter owned 3.87% of the company.  They also own a much smaller position in Zodiac.  Basically, they're looking for a shareholder vote on the merger in an attempt to stop it.

Hohn writes, "In our opinion the fair value of Zodiac is around €20, which is way below the offer of €29.5 and so Safran’s  shareholders will suffer massive value destruction. The deal represents a  terrible return on investment (ROI) for Safran. Even in a best - case scenario, with  Zodiac’s margins recov ering  from  5%  to  14%,  the  after - tax  ROI  would  be  only  6%,  a  long  way  below  Safran’s cost of capital. At Zodiac’s current level of profitability the ROI of the deal would be just 2%."

Embedded below is TCI Fund's presentation on Safran / Zodiac:


Also embedded below is Chris Hohn's letter to Safran:


You can view the rest of TCI's materials at the website they've established for their campaign: A Stronger Safran.

For more on this hedge fund, we've posted up Chris Hohn's presentation on Charter Communications from the Sohn London conference.