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Current DateTime: 08:21:45 25 Nov 2009
LinksList Documentid: 30328029

CNBC Stock Blog

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Oct.06
6:02 PM ET
Monday, 6 Oct 2008
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  Loading...      ()   ], or "about 170 million shares," amid the news that Citigroup [C  Loading...      ()   ] 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  Loading...      ()   ], 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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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  Loading...      ()   ] over the last two weeks.

Disclosures:

Disclosure information was not available for Ackman or his fund.

Disclaimer

© 2008 CNBC.com

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