What tactics did the activist investor William Ackman (Pershing Capital) pursue in his campaigns against Wendy’s and McDonalds? Briefly describe each tactic used and the way in which each tactic might help Ackman to achieve his goals. What other tactics could Ackman have employed to achieve his goals? B. What did Ackman ultimately hope to achieve through his activism? What role, if any, did corporate governance issues play in Ackman’s activist campaigns? C. With the benefit of hindsight, describe the alternative tactics that McDonalds’ management could have pursued in response to Ackman’s display of activism?
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Would it have been possible for McDonalds’ management to maintain its resistance at any cost? D. In you view, who emerged as the ‘winner’ in this activist standoff between Ackman and McDonalds? Explain why (supplying evidence in support of your arguments). A. What tactics did the activist investor William Ackman (Pershing Capital) pursue in his campaigns against Wendy’s and McDonalds? Briefly describe each tactic used and the way in which each tactic might help Ackman to achieve his goals. What other tactics could Ackman have employed to achieve his goals?
Spin off A situation in which a company offers stock in one of its wholly-owned subsidiaries or dependent divisions such that subsidiary or division becomes an independent company. The parent company may or may not maintain a portion of ownership in the newly spun-off company. A company may conduct a spin-off for any number of reasons. For example, it may wish to divest itself of one industry so it can expand into another. It may also simply wish to profit from the sale of the subsidiary.
A spin off should not be confused with a split off. | With implementing spin off, Wendy would be able to get independent from its parent operation chain Tim Horton’s dog nut. Even when Tim Horton’s Dog nut was a growth driver, representing 50 % of overall operating profits, the spinoff would promote tangible stock raising price. IPO will provide Horton’s value up to 4,48 billion. | Autonomous Operations from its subsidiary (Tim Horton’s)+ Confidence to Joint venture capital. Tax free transactionUnlock of Shareholder value. 72 M in equity , for 15% of Horton’s total shares. 15 % stock value increase after spinoff. | Being Tim Hortons the major growth agent of Wendy’s, and despite the sudden increase on stock value, the spin off revealed the not satisfactory long term value of Wendy’s , which leaded to a long term price decrease.
Sale of large portion of the company’s restaurant to franchisees. | Ackman initiative included to sell more than 200 real estate sites, close 60 poorly performing stores and sale of hundreds of company owned restaurants. Profit increase of 25 %Reduction of debt by 100 mIncrease on equity and long term profits+ Funds to invest in growth and unexplored markets. + steady cash flow from franchisee fees. | Loss of potential plus value added equity: Real Estate. Lack of confidence on franchisees for the management of a solely entity with no company owned restaurants. | Share repurchases. A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. Share repurchase is usually an indication that the company’s management thinks the shares are undervalued.
The company can buy shares directly from the market or offer its shareholder the option to tender their shares directly to the company at a fixed price. | With the Horton’s spin off the appreciation of tangible benefits to shareholders’ dividends would be finally accountable in Wendy’s equity interest to shareholders. | Reduce the number of outstanding shares. + earnings / share+ price of Wendy’s shares. | Dependability of the dividend for investors: More important. As such, investors may invest more heavily in a stock with a dependable dividend than in a stock with less dependable repurchases.
Asymmetric information on transaction details. | Avoidance of large acquisitions. | The strategy includes this provision to state the level of certainty for investors in Wendy’s transaction as a complementary key of the probable long term stock price decrease due to the spin off strategy, the reliability on stable company with long term outlook of growth will provide such a reflection in stock price. | + initiative for investors to keep its equity level I the company+ Increase on stock price. | Limitation for expansion in short term.