PSH-Annual-Report

Annual Report Year Ended December 31, 2014Restaurant Brands International Inc. (RBI)At the end of August, Burger King announced that it would acquire Tim Hortons, Canada’s leading quickservicerestaurant (QSR) company, for $12 billion forming the newly renamed Restaurant BrandsInternational (RBI). The transaction closed in December of 2014. Tim Hortons operates a 100%franchised business model with ~4,500 units. In Canada, where 80% of Tim Hortons’ restaurants arelocated, the company commands a market share which RBI estimates to be more than 40% of total QSRtraffic and nearly 75% of QSR caffeinated beverages sales.We believe the acquisition of Tim Hortons will create significant long-term value for RBI shareholders asexecuted by the company’s controlling shareholder, 3G Capital, which has an extremely strong trackrecord of successful business transformations. In the four years that 3G has owned a controlling stake inRBI, the company has dramatically improved its operations, reduced its capital intensity, significantlygrown its number of restaurants, and put in place an improved capital structure.We believe the improvements that 3G has enacted at Burger King will serve as a template to create valuein the Tim Hortons transaction. We believe there is substantial unit growth opportunity outside of Canada,and that under 3G’s leadership, Tim Hortons is well positioned to identify meaningful operations andcapital efficiencies. The acquisition enhances Restaurant Brands’ medium and long-term EPS growthrate, and long-term shareholder value.Platform Specialty Products Corporation (PAH)We believe that Platform Specialty Products has the opportunity to invest large amounts of capital at ahigh rate of return by acquiring a portfolio of specialty chemicals businesses that can operate moreefficiently as part of a larger industry platform.Platform’s business model of investment in asset-light, high-touch specialty chemical businesses ischaracterized by high margins, low capital intensity, and high switching-costs. Platform’s managementteam has a demonstrated record of value creation which benefits by an environment which is favorablefor M&A activity.In 2014, the company announced $5 billion in acquisitions in the agricultural chemicals industry byacquiring Chemtura AgroSolutions, Agriphar and Arysta LifeScience Limited. Agricultural chemicals arevital to increased food production, and are a key input to growing crop output to meet the rising demandfor food worldwide. Agricultural chemicals have high barriers to entry, both from the need for intensive(and lengthy) research programs and the high hurdle of regulatory approval associated with any input inthe food chain. With these acquisitions, we believe that Platform has assembled a leading global cropsolutions business that offers a full product portfolio and diversity across crop varieties and geographies.Zoetis Inc. (ZTS)In November, Pershing Square announced an 8.5% stake in Zoetis, the world leader in branded animalhealthcare products. Until 2013, Zoetis was a non-core subsidiary of Pfizer, whose primary business ishuman healthcare products. In January 2013, Pfizer completed an initial public offering of a 20% stake inZoetis. The separation from Pfizer was completed in June 2013, when Pfizer split off its remaining 80%ownership to its shareholders.The separation resulted in the creation of the only large, independent, publicly traded animal healthcompany in the world. The company has a market capitalization of ~$24 billion and ~$5 billion in revenue.Zoetis’ business model passes our high bar for business quality. Zoetis participates in markets with strongsecular growth, driven by global increases in protein consumption, pet ownership, and the use ofmedicines to treat pets and livestock. As a result, the global animal health market has grown at anaverage of about 4% since 2008 and has experienced positive volume growth every year since 2003.Historically, Zoetis’ organic growth has exceeded the industry average.PERSHING SQUARE HOLDINGS, LTD. 7