Ackman tables HHH merger plan targeting Berkshire-style model
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The news: Bill Ackman’s Pershing Square Capital Management proposed merging a subsidiary with NYSE-listed Howard Hughes Holdings to reshape the company into a “modern-day Berkshire Hathaway.”
The numbers: Under the plan, Pershing will buy 11.8 million shares it doesn’t already own for USD1 billion at USD85 per share, and Howard Hughes will repurchase USD500 million of stock at the same price.
The move would increase Pershing's stake from 38% to 61.1-69.2%, depending on how many investors agree to the buyout, the company said.
In a letter to the Howard Hughes board, Ackman, a former chairman of the real estate company, said long-term shareholders had been displeased with the stock performance and were keen on a potential deal.
Ackman wants to transform Howard Hughes into a “modern-day Berkshire Hathaway that would acquire controlling interests in operating companies,” he said, using existing cash and cash from the transaction for the new investments.
In the letter, Ackman said all employees can expect to retain their positions, existing leadership would manage key operations, and he would take the role of chairman and CEO.
Shareholders can accept cash or roll over shares into the merged company, the letter said. Howard Hughes shares rose almost 13% following the announcement, while Pershing Square shares were slightly lower.
The context: Ackman had been preparing for the deal for months. Last August, he revealed collaborating with Jefferies to explore acquiring the remaining Howard Hughes shares not already owned by Pershing, 44% of which he controls.
Representatives from Howard Hughes Holdings had not yet commented on the proposed deal.
What they said: “With apologies to Mr. Buffett, HHH would become a modern-day Berkshire Hathaway that would acquire controlling interests in operating companies,” Ackman said in the letter.
“We strongly believe that we are the right long-term owner,” Ackman added. “With reference to Howard Hughes Holdings’ namesake – one of the world’s greatest aviators and entrepreneurs – let’s give this bird some wings.”
The sources: Pershing Square letter to HHH, Bloomberg, Reuters
