Activist Ackman calls Chipotle relationship 'extremely constructive'

November 10, 2016 12:03 PM EST

William Ackman, founder and CEO of hedge fund Pershing Square Capital Management, speaks during the Sohn Investment Conference in New York May 4, 2015. REUTERS/Brendan McDermid


Get the Pulse of the Market with StreetInsider.com's Pulse Picks. Get your Free Trial here.

By Lisa Baertlein and Michael Flaherty

(Reuters) - Billionaire investor William Ackman on Thursday said he has had an "extremely constructive relationship" with Chipotle Mexican Grill Inc (NYSE: CMG) since buying a large stake in the beleaguered burrito seller.

Shares in Chipotle were up 6 percent at $391.70 in midday trading, buoyed by Ackman's comments and the expectation that the company could benefit from business-friendly tax reforms expected to be championed by President-elect Donald Trump.

Ackman's Pershing Square Capital Management announced a nearly 10 percent stake in Chipotle in September. His team believes that marketing, menu, cost-saving, technology and governance initiatives will help the shares rebound from a 40 percent swoon since last year's high-profile food safety lapses.

In October, Reuters reported that Chipotle had hired a top Wall Street law firm, investment banks and a public relations shop to help defend itself against the hedge fund billionaire.

Ackman said such hires are standard operating procedure for companies when an activist investor buys a stake.

"Our investors should not be concerned that we're in some kind of hostile engagement here," Ackman said on his fund's quarterly call with investors.

Chipotle's board has been criticized by pension funds and other shareholders, who say it is too chummy, too generous with executive compensation and too entrenched, with five of its nine directors having served 18 years or more.

Two union-affiliated shareholders in Chipotle earlier this month filed a shareholder resolution to replace company chairman, founder and co-Chief Executive Steve Ells, with an independent director.

People familiar with Ackman's thinking have suggested that he believes Chipotle's long-serving board is due for an overhaul. Ackman and his team did not mention Chipotle's board on Thursday's call.

Chipotle last week said it was committed to dialogue with investors including its largest shareholders and that it has been "actively working on board refreshment."

Reuters last week reported that Ackman and Chipotle signed an agreement to engage in confidential discussions, a sign that the activist may be able to wield change at the chain without an expensive and time consuming proxy contest.

(Reporting by Lisa Baertlein in Los Angeles and Michael Flaherty in New York; Editing by Alan Crosby)



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In






Related Categories

Reuters

Related Entities

William Ackman, Pershing Square Capital, Donald J. Trump, Hedge Funds

Add Your Comment