They held the inaugural Value Investing Congress， a gathering of antsy hedge fund managers， at the Time Warner Centre in New York this week. It was a nice choice of venue.
As Bill Ackman of Pershing Square Capital was on stage outlining his plan to push McDonald‘s into taking on $9bn （￡5.2bn， ?7.7bn） of new debt and selling most of its company-owned restaurants， Time Warner’s bosses were at work 30 floors above. Carl Icahn， their own hedge fund irritant， has pressured them into increasing a $5bn share buyback to $12.5bn and still wants them to sell its cable division.
The congress was billed， with a dollop of hyperbole， as the biggest gathering of value investors outside the annual meeting of shareholders in Berkshire Hathaway. Mr Ackman is no Warren Buffett. He does not have $43bn to spare （Berkshire Hathaway‘s cash pile happens exactly to match McDonald’s stock market value） and had to amass his 5 per cent stake in McDonald‘s mostly in options.
Mr Ackman also wants a quicker turn than the indefinite holding period Mr Buffett espouses. Still， he and his fellow agitators are doing some good for themselves and for other investors. They are forcing managers who want to sit on assets to justify themselves. They may not be the Sage of Omaha but a lot of what they say makes sense.
过去3年来，公司不愿冒险，使自己易受对冲基金活跃分子的攻击。在经历了安然（Enron）和世通（WorldCom）破产的恐慌后，它们致力还债，并储备现金，以免遭遇相似的危机。来自标准普尔（Standard & Poor‘s）的数据显示，美国公司持有1.3万亿美元的现金和流动资产，超过所有资产负债表资产的10%. Companies have made themselves vulnerable to activist hedge funds by playing safe in the past three years. After the scare of the collapses of Enron and WorldCom， they paid down debt and amassed cash in case they suffered a similar crisis. Now， according to Standard & Poor’s， US companies hold $1，300bn of cash and liquid assets – more than 10 per cent of all balance sheet assets.
Hoarding so much is inefficient： companies reduce their return on equity by having too little debt. That makes the smaller ones targets for private equity funds that can get quick results by gearing up balance sheets before improving operations. Koch Industries‘ $13.2bn acquisition of Georgia-Pacific this week is the latest public-to-private deal.
Stock market investors complain when private equity funds buy corporate assets only to sell them back to the stock market at a far higher price a couple of years later. But it is their fault if they allow executives of public companies to leave money on the table. The fact that the US stock market has been becalmed this year while investors have poured $80bn into private equity indicates that something is awry.
Hedge funds are attracted by arbitrage opportunities so it is not surprising that many are now trying to close the gap between public and private valuations. Mr Ackman is an example. He has pursued McDonald‘s for seven years to restructure itself and either to sell or borrow against its estimated $46bn of real estate.
To the credit of McDonald‘s executives， they did not simply reject Mr Ackman out of hand. Instead they hired two investment banks， which does not come cheap， to assess his ideas and then took them to the board. But after going through these motions， they have come out fighting， dismissing his scheme as “an exercise in financial engineering”。
It is more than that. Mr Ackman‘s plan for McDonald’s to sell a 65 per stake in its 9，000 company-operated restaurants （the rest of its 31，000 outlets are run by franchisees） would achieve more than raising $3.3bn in cash. It would also focus McDonald‘s on its highest-margin businesses and introduce a clearer division of responsibilities between the brand company and its franchisees.
Perhaps it is unnecessary. McDonald‘s has adjusted nimbly to the shift towards healthier food and its restaurants’ average turnover is double that of rivals. But Mr Ackman is more than a financial hit man. He is well-versed in the company‘s history and he makes a good case that it has drifted from the operating principles of Ray Kroc， its founder.
Managers prefer to have a hand in different things because it gives them more operational flexibility. Just as McDonald‘s wants to run restaurants as well as franchising them， Time Warner’s executives like controlling a cable company as well as networks and a film studio. Dick Parsons， its chairman and chief executive， says it is like “having a big brother in the schoolyard” when he negotiates with other cable operators.
What reassures executives does not always reward shareholders. If a private equity group owned McDonald‘s or Time Warner， it might well carry out the kind of restructuring that Mr Ackman and Mr Icahn seek. It would be less bothered by preserving managerial freedom of manoeuvre than raising operating margins and improving cash flow.
It would also leverage their balance sheets to a greater degree than either hedge fund activist seeks. Executives can reasonably question how much debt they should take on. Interest rates are rising and Standard & Poor‘s expects high-yield bond defaults to increase， to follow. Still， as Barbarians at the Gate go， Mr Ackman and Mr Icahn are mild-mannered.
In practice， neither Time Warner nor McDonald‘s is likely to be swallowed up by a private equity group because they are too big. This makes hedge fund activism vital： without it， the biggest companies are less likely to focus on investors’ interests than their smaller counterparts. They need not do the bidding of every hedge fund manager with some options but good ideas ought to be taken seriously.
发表于 2006-4-4 18:11:24