Ackman Says Tax Inversion Rules Could Lead to U.S. Drugmakers Selling to Overseas Buyers

(Bloomberg) — The backlash against acquisitions meant to skirt U.S. tax laws could spur more midsize U.S. drugmakers to sell to overseas buyers, Bill Ackman, the billionaire activist hedge fund manager, said Thursday.
Takeover activity in 2014 was highlighted by U.S. companies — including Medtronic Inc. and Pfizer Inc. — trying to lower their tax bills by acquiring a legal address abroad in what’s called a tax inversion. Then the U.S. Treasury Department in September announced a set of rules to make the deals more difficult.
Instead of buying overseas targets, Ackman said, U.S. drugmakers may become sellers in order to gain similar benefits.
“We have more consolidation with a foreign buyer with a more favorable structure buying U.S. companies,” he said Thursday on the sidelines of the Harbor Investment Conference in New York.
In a wide-ranging interview with Bloomberg Television’s Stephanie Ruhle, Ackman discussed everything from speculation about his interest in McDonald’s Corp. — about which he was noncommittal — to restructuring consultant-activist Harry Wilson’s campaign to get General Motors Co. to buy back shares.
“I don’t like a thesis predicated on just capital return, my assumption is that Harry has more up his sleeve,” he said in response to a question from Ruhle.
‘Closer Connection’
He also addressed the increase in shareholder activism.
“We went from very active owners of businesses 100 years ago, to increasingly more passive owners of businesses,” Ackman said. “The rise of shareholder activism is almost, kind of pushing us back to the past, where there was a much closer connection between the owner and the way the business is run.”
Last month Ackman said an investment in McDonald’s, the world’s largest fast-food chain, is unlikely, after refusing to end speculation he was targeting the fast-food chain. He was coy again Thursday.
“We look at everything. We might own it, we might not own it,” he said in response to a question from Ruhle.
Ackman told Bloomberg Television last month that he’s content with his investment in smaller rival, Burger King Worldwide Inc., and considered McDonald’s stock price rich.
He said Thursday that if 3G Capital Inc., which owns Burger King, ran McDonald’s, he’d “own the stock for sure.” Ackman’s Pershing Square Capital Management LP is the biggest shareholder in Burger King with almost an 11 percent stake, according to data compiled by Bloomberg. Ackman has said he’s invested his own money in Brazilian buyout firm 3G Capital.
Howard Hughes
Earlier today, Ackman reiterated that Pershing Square probably won’t ever sell its stake in Howard Hughes Corp.
Pershing Square is the second-largest shareholder in Howard Hughes, the owner of real estate including master planned communities that was spun off from General Growth Properties Inc. as it exited bankruptcy in 2010.
“It’s a platform — you’re buying the assets at a discount, you get a great management team — and if we can find other interesting things to do we’re going to deploy that capital,” Ackman said. “I don’t think I’ll ever sell Howard Hughes, I think I’ll own it forever.”
Ackman said he believes the property company is presently priced just for its New York City assets when fully developed “and you get the rest for free.”
Howard Hughes, based in Dallas, has a market value of about $5.5 billion. Pershing Square owns about 9 percent of the shares, according to data compiled by Bloomberg.
Home Run
Ackman sold all of his shares in General Growth a year ago, marking the end of one of Pershing Square’s most profitable investments. Ackman, 48, helped rescue General Growth from near-collapse by pushing it to file for bankruptcy in 2009, and was part of an investor group in its subsequent reorganization.
The effort “turned $60 million into $1.6 billion,” the hedge-fund manager told Bloomberg News in 2011, and contributed to his flagship fund’s net return of 29 percent in 2010.
Ackman’s Pershing Square Capital Management’s activist investment strategies have seen him clash with companies and governments. He has investments in drugmaker Allergan Inc. and animal-health company Zoetis Inc. and is waging campaigns against management at Herbalife Ltd., Air Products and Chemicals Inc., and the U.S. government over mortgage backers Fannie Mae and Freddie Mac.
Activist investors generally acquire equity stakes in publicly traded companies and agitate executives and directors to make changes they believe will boost shareholder returns.
To contact the reporter on this story: Beth Jinks in San Francisco at bjinks1@bloomberg.net
To contact the editors responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net Elizabeth Wollman, Andrew Pollack