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Bill Ackman Has Big Plans

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The Pershing Square founder smartly used a cleverly disguised subsidiary to build up its largest investment ever, in Botox-maker Allergan. It has similar plans for the future, although the element of surprise may have been lost.

In amassing its 9.7 percent stake in Allergan, Mr. Ackman’s Pershing Square Capital Management used a corporate entity that his $15 billion hedge fund formed in Delaware on Feb. 11 to buy shares and call options — a financial contract that gives the hedge fund the right to buy shares at predetermined price. Over a two-month period, the entity, PS Fund 1, used a combination of cash contributed by Pershing Square and Valeant, to build an equity position in Allergan that’s valued at about $4 billion.

But corporate records in Delaware reveal that on the same day that Pershing Square organized PS Fund 1, four other entities bearing the names PS Fund 2, PS Fund 3, PS Fund 4 and PS Fund 5 were also created….

Mr. Ackman said in an email that the corporate subsidiaries would not be used to purchase any more shares or options of Allergan but might be used to build equity stakes in other publicly traded companies. At a news conference on Tuesday to discuss the Allergan bid, Mr. Ackman said he was looking forward to partnering with Valeant again in another transaction but declined to discuss specifics….

Since at least 2010, Mr. Ackman’s hedge fund, which specializes in taking large ownership stakes in companies to agitate for either stock buybacks or strategic changes, has used similar corporate subsidiaries to acquire shares or options in companies that were targets of his firm. A review of Delaware corporate filings reveals at least three dozen subsidiaries created by his firm to be used in stock acquisitions over the past four years, most of them with some variation of the name: Pershing Square Holdco.

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