NEW YORK Pershing Square Capital Management LP, the activist hedge fund founded by William Ackman, disclosed Feb. 14 a 1.5-percent stake in McDonald's Corp., leading some to speculate that the investor is gearing up to pressure the largest restaurant company to increase its level of refranchsing or to take on a leveraged recapitalization.
In a filing with federal regulators that outlines end-of-year holdings, Pershing said it held about 18.5 million shares of McDonald's common stock, worth about $830 million, making it the ninth largest shareholder. Previously, the fund had held about 300,000 shares.
Pershing and Ackman have been active with McDonald's in the past, and in 2005 had pressured the company to spin off its corporate restaurants in an initial public offering and borrow heavily for a large share repurchase. McDonald's declined to take on those initiatives, but did increase its refranchising efforts, and also started to provide more detailed information on corporate units, another two moves Ackman had wanted.
McDonald's has reiterated its plan to sell 2,300 restaurants to licensees through 2008 - a 53 percent increase from the company's original plan to sell 1,500 restaurants, an increase many credit to Ackman's pressures. McDonald's also said it planned to sell 100 units to United Kingdom franchisees through 2008, and according to one analyst, McDonald's may be looking to sell its stake in its Latin American operations.
In September, after selling his shares in McDonald's, Ackman alerted the company that his funds would seek to buy about $793.8 million in stock, and reportedly sent a letter to other investors to drum up support for a $2 billion investment and proxy battle.
Securities analyst John S. Glass at CIBC World Markets in Boston said Ackman's new position in McDonald's could be "much ado about nothing," but also could help increase the company's share price, as discussions surrounding now "in vogue" recapitalizations become part of the company's dialogue.