Bill Ackman, Pershing Square Capital Management CEO, speaking at the Delivering Alpha conference in NYC on Sept. 28th, 2023.
Adam Jeffery | CNBC
Bill Ackman’s Pershing Square is forming a new entity to merge with Howard Hughes Holdings, offering current holders of the real estate company $85 a share.
“While we are pleased with the substantial business progress Howard Hughes Holdings has made over the more than 14 years since it went public, we, like other long-term shareholders and this board, have been displeased with the Company’s stock price performance,” wrote Ackman in a letter to the Howard Hughes board.
Ackman proposed forming a new subsidiary of Pershing, which currently owns about 38% of Howard Hughes, that would merge with the real estate developer based in The Woodlands, Texas.
“Stockholders would have the option of receiving more than a majority of their merger consideration in cash at $85.00 per share – representing a premium of 38.3% to the unaffected stock price and a premium of 18.4% to the closing price this past Friday – and the balance in stock of the post-merger company,” said the letter.
Howard Hughes shares jumped 11% to $79.67 a share in premarket trading on the news. CNBC was reaching out to the company for comment.
Pershing first invested in Howard Hughes in November 2010 in a $250 million rights offering at $47.62 per share. Over the last 14 years, Pershing’s investment produced a 35% total return, or a mere 2.2% compound annual return, Ackman said. The company has also paid zero dividends since its inception, he added.
“The Company’s stock price performance is obviously extremely disappointing, particularly in light of the high regard we have for this board and the Company’s superb management team led by David O’Reilly and the nearly one thousand employees who work at Howard Hughes, many of whom I have gotten to know over the last more than decade,” Ackman wrote in the letter.
Under the proposed deal, Ackman said Howard Hughes would remain unchanged and continue to be managed by the current leadership team led by CEO David O’Reilly.
“We do not intend to make any changes to the HHC organization, its employees, or its long-term strategy,” Ackman said. “We would expect all HHH current employees to remain employed as a result of the Transaction.”