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Fund Honcho Ackman: Wachovia Bidding War Good for Banks
Wachovia shares are down Monday on "crisis psychology" -- but hedge fund master Bill Ackman is optimistic.
Ackman, managing principal of Pershing Square, scooped up a 7 percent stake in Wachovia [WB
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], or "about 170 million shares," amid the news that Citigroup [C
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] would buy the troubled financial's banking business.
"We started buying aggressively after the Citi deal was announced," Ackman told CNBC. "What was interesting was citi was buying a subsidiary, but assuming holding company liabilities -- an unusual transaction.
With rules now in effect that boost acquirors' ability to offset losses from bad debts held by other banks, and as a result of the "unusual" structure of the deal, some "very interesting tax attributes" were created -- namely, tax losses that can be carried back or forward.
"We had to sleuth around to figure out what's going on," he said.
And here's what's going on: "Our estimate of [Wachovia] value, on the low side, is $8 per share. Depending on how much cash is in the holding company, that could be a much higher number."
Ackman addressed the intrusion of Wells Fargo [WFC
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], which made its own higher offer for Wachovia -- an offer that was accepted. The counteroffer was a positive development, says Ackman: "It gave us some certainty" on valuation.
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CNBC Intelligence:
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A bidding war would be "positive for the market," engendering "hope for banking in America."
And if Wells wins, "We could wind up as shareholders of...a very well-run franchise," said Ackman.
More optimism for financial stocks: Ackman notes that Pershing Square has also invested in AIG [AIG
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] over the last two weeks.
Disclosures:
Disclosure information was not available for Ackman or his fund.
Data is a real-time snapshot *Data is delayed at least 15 minutes
