Bill Ackman’s stake in United Technologies
United Technologies (UTX) formed 11.17% of Bill Ackman’s Pershing Square’s portfolio value at the end of Q1 2019. UTX has been a key contributor to Pershing’s gains so far this year. Bill Ackman has been quite positive regarding UTX’s three-way split. He also believes that the business separation should be a catalyst for significant share price appreciation.
Ackman’s rationale for opposing UTX-RTN merger
But he isn’t positive about the United Technologies-Raytheon (RTN) merger. According to the Wall Street Journal, Ackman wrote in an email to UTX’s CEO, Greg Hayes, that it “makes no sense to us why you would consider a stock acquisition using today’s massively undervalued UTC common stock to buy a large business of inferior quality to the company’s existing businesses, and for which we cannot comprehend the strategic logic.”
Ackman also mentioned that if UTX pursues the merger, he would publicly oppose it and so would a “substantial majority” of shareholders. Daniel Loeb of Third Point, another hedge fund mogul, also holds a stake in UTX. The New York Post reported that Loeb also opposes the deal.
Stock price reaction
United Technologies mentioned on June 11 that it is confident that its shareholders will see the merits of this transaction and the value it brings.
While the initial stock price reaction from both UTX and RTN was positive, both stocks sold off after the conference call. Yesterday, Raytheon’s stock ended 5.1% lower, while United Technologies closed down 4% lower.