Pershing Square builds $5.5-bn stake in Mondelez

Activist investor William A Ackman has amassed a $5.5-billion stake in Mondelez International, which makes Oreo cookies and Cadbury chocolate, in anticipation of the food company becoming a target of industry consolidation, The Wall Street Journal.

Mondelez International was spun out of Kraft Foods in 2012, following its $19.6-billion hostile takeover of Cadbury in 2010 (See: Shareholders approve Kraft's acquisition of Cadbury).

Ackman's $20-billion hedge fund, Pershing Square Capital Management, announced last night that it intended to notify the Securities and Exchange Commission that it had a 7.5-per cent stake, which included options and forward contracts, in the company.

Ackman, who had made bets on other food companies like McDonald's, believed that Mondelez either needed to raise its revenue and cut costs or put itself up for sale, according to a person briefed on the investment but not authorised to speak publicly about it.

In June, Ackman took a 22-per cent stake in Nomad Holdings Ltd, a so-called special-purpose acquisition company, or SPAC. Such companies acted as vehicles to raise money from investors to make acquisitions.

Nomad was focused on food companies, and in April, it announced that it had struck a deal to acquire Iglo Foods Holdings, a seller of fish sticks and frozen foods in Europe, for about $2.9 billion.

Things could heat up at Mondelez, where another activist investor, Nelson Peltz, sat on the board. Peltz's multibillion-dollar hedge fund, Trian, started pushing for change at the company several years ago (Activist investor Nelson Peltz renews call to split PepsiCo).

"We welcome Pershing Square as investors in our company," Mondelez spokeswoman Valerie Moens said. "We'll continue to focus on executing our strategy and on delivering value for all our shareholders."

Ackman's moves are closely watched by the market, given his success as an activist investor. Share prices of companies he pushes for improvement are known rise.

Peltz played a role in the breakup of Kraft into Kraft Foods Group and Mondelez in 2012. In April, Peltz had said he was not interested in pushing the company for a big deal and wanted it to continue improving its profit margin, sales and market share.

Mondelez had introduced several cost cutting measures, including shutting factories and "zero-based budgeting," which required managers to justify every expense in each new budgeting period.

Last week, the company's second-quarter profit came in better-than-expected helped by lower costs and raised its share buyback plan by $6 billion.