Among the heavy hitters rounded up by Ackman for his Pershing Square Tontine Holdings Ltd investment vehicle, according to the filings, are mutual fund giant T. Rowe Price Group Inc, investment firm Guggenheim Partners, hedge fund Baupost Group, Canadian pension fund Ontario Teachers and private equity firm Blackstone Group Inc.
Tontine raised $4 billion in an initial public offering (IPO) in July. It is the largest-ever special purpose acquisition company (SPAC) and will use the IPO proceeds, as well as debt and new equity it can raise, to acquire a minority stake in a company valued at tens of billions of dollars.
As is typical with SPACs, Tontine has not told its investors what specific company or type of company will be acquired. As possible targets, Ackman is eyeing family-owned businesses, public companies that want to spin off big divisions and "mature unicorns," developed and privately financed companies worth more than $1 billion, a person familiar with the process said.
This is where deep-pocketed SPAC shareholders come in handy. Were Ackman to seek an investment that exceeded his SPAC's resources, the investors could boost its firepower by providing additional equity financing. Ackman's hedge fund has also committed to investing between $1 billion and $3 billion to any deal.
Tontine's IPO was heavily oversubscribed, allowing Ackman to hand-pick the investors and what stakes to allocate to them, according to people familiar with the process, who requested anonymity.
Tontine brings a "curated list of shareholders who are expected to be invested for many years," Ackman told bankers working on the SPAC, according to one of the sources.
A spokesman for Ackman declined to comment.
Tontine is the highest-profile SPAC in a year in which blank-check companies raised $65.7 billion to date, smashing the previous record of $13.6 billion, according to SPAC Research. Lucrative SPAC deals, such as those for electric truck maker Nikola Corp, space tourism company Virgin Galactic Holdings Inc and fantasy sports and gambling company DraftKings Inc, prompted many others to follow suit.
Many institutional investors have stayed away from SPACs, however, concerned that they pose too high a risk. Blue-chip investors' endorsement of Tontine indicates Wall Street is confident of Ackman's ability to find a successful deal.
Guggenheim Partners owns 22 million Tontine shares worth roughly $507 million, while Seth Klarman's Baupost owns 17.5 million shares or roughly $400 million, the filings show.
Ontario Teachers owns a stake worth $257 million while the T. Rowe Price stake is valued at $174 million.
Hedge funds Soroban Capital, Millennium Management, Fir Tree Capital Management, Citadel Advisors, Mason Capital Management, Moore Capital Management and Scoggin Management also have stakes in Tontine, according to the filings.
Most Tontine investors are based in North America, but the SPAC also counts sovereign wealth funds in Asia, the Middle East and Europe as shareholders, sources familiar with the matter said.
NO FOUNDER SHARES
While many SPACs give their managers so-called founder shares that can result in them owning 20% of the merged company, Ackman opted out of that compensation structure. He is also set to receive warrants that require him to invest more money to own less of the target company than managers of other SPACs.
Tontine shareholders also receive warrants, but unlike with other SPACs they forfeit two-thirds of their value if they cash out when a merger is announced. Ackman did this to discourage investors with a short-term horizon from participating in Tontine's IPO.
Tontine is not Ackman's first SPAC. He co-sponsored Justice Holdings in 2011, which raised $1.5 billion and merged with Burger King Worldwide a year later. The company is now called Restaurant Brands International, and remains one of Ackman's biggest investments.
Ackman is best known for his big wins as an activist shareholder in railroad operator Canadian Pacific and Botox maker Allergan, though he also suffered deep losses at pharmaceutical company Valeant and nutritional supplements manufacturer Herbalife. Since his $12.5 billion firm's launch in 2004, Ackman has returned an average 16% annually, compared with the Standard & Poor's 9.3% gain. This year, his Pershing Square Holdings fund is up 55%.
(Reporting by Svea Herbst-Bayliss in Boston; Additional reporting by Joshua Franklin in New York; Editing by Greg Roumeliotis and Matthew Lewis)
By Svea Herbst-Bayliss