Exclusive: Chipotle,
Ackman talks intensify with confidentiality agreement
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[November 05, 2016]
By Svea Herbst-Bayliss and Lisa Baertlein
BOSTON/LOS
ANGELES(Reuters) - Billionaire investor William Ackman and Chipotle
Mexican Grill <CMG.N> have signed an agreement to engage in confidential
discussions, a source familiar with the matter said, in a sign that the
activist may be able to force change at the burrito chain without a
costly and drawn-out proxy contest.
Ackman, who took a nearly 10 percent stake in the beleaguered fast
casual food chain two months ago and has not disclosed his strategy,
wants multiple board seats with the aim of beefing up food safety and
marketing, three people familiar with the matter said this week.
Chipotle declined to comment on discussions with specific shareholders,
but said it was committed to dialogue with investors including its
largest shareholders and that it has been "actively working on board
refreshment."
A spokesman for Ackman's firm, Pershing Square Capital Management,
declined to comment.
The signing of the confidentiality agreement does not guarantee that a
deal can be reached or is near, but it is a sign of a potential
negotiated settlement between a board that has defended its founder-led
management and an activist known for public, acrimonious fights.
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Chipotle shares have dropped 40 percent since a series of food borne
illness outbreaks were linked to the chain in late 2015 and led to
temporary restaurant closures across the United States. Sales have yet
to recover to levels seen before the food safety incidents jolted
confidence in the formerly top-performing restaurant operator.
Chipotle recently hired a top Wall Street law firm, investment banks and
a public relations shop to help defend itself against the hedge fund
billionaire, sources familiar with the matter told Reuters.
The company's board has long been under fire from pension funds and
other shareholders for being too insular, for the level of executive
compensation, and for a handful of members having served more than 15
years.
This week investors Amalgamated Bank and CtW urged shareholders to name
an independent chairman, replacing founder and co-Chief Executive Steve
Ells as leader of the board. They hope to take up the issue the next
annual meeting and are beginning to lobby large institutional investors
like Fidelity and Vanguard, both big holders of Chipotle shares.
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![](../images/110516pics/busine77.jpg)
William Ackerman, CEO and Portfolio Manager of Pershing Square
Management, is pictured during the Harbor Investment Conference in
New York, U.S. on February 13, 2013. REUTERS/Shannon Stapleton/File
Photo
![](http://archives.lincolndailynews.com/2016/Nov/05/images/ads/current/graue_preowned_102416.png)
Ackman is known for loud campaigns, including an expensive but
successful fight at Canadian Pacific <CP.TO> where he won seven board
seats, but more recent plays have been less noisy.
Last year, a member of Ackman's investment team joined the board at
animal health company Zoetis <ZTS.N> and in 2013 his firm negotiated for
seats at Air Products & Chemicals <APD.N>. Both happened relatively
quickly and quietly. Investors in a Pershing Square investment vehicle
that invested in Air Products saw a return of 45 percent after fees over
three years, according to a letter seen by Reuters.
Pershing Square said Zoetis was one of three winners in its portfolio
last year, adding 1.2 percent, and the stock has risen 4.2 percent so
far this year.
Turning around Chipotle is a critical mission for Ackman, whose Pershing
Square International fund has lost roughly 17 percent this year after
dropping 16 percent last year.
Chipotle added Stephen Gillett, a senior executive at Google X, to its
board in March 2015. That move came two months before investors approved
a non-binding proposal that gives investors more power to shake up the
company's board by nominating new directors.
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"We have been committed to shareholder engagement for a number of years,
and maintain ongoing dialogue with numerous investors, including our
largest shareholders," the company said in a statement on Friday. "We
will continue to take whatever actions are necessary to deliver on our
recovery and enhance shareholder value."
(Editing by Peter Henderson and Mary Milliken)
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