Pershing Square Capital Management, led by Bill Ackman (Trades, Portfolio), has proposed merging a newly formed subsidiary with Howard Hughes Holdings Inc. (HHC, Financial), aiming to transform the real estate developer into a modern version of Berkshire Hathaway. In a letter to investors published on its website, the investment firm offered Howard Hughes shareholders $85 per share, with most of the payment in cash. This offer represents a 38.3% premium over Howard Hughes' stock price when Pershing Square expressed potential merger interest in August.
Ackman has been preparing for this acquisition of Howard Hughes for several months. In August, he mentioned collaborating with Jefferies Financial Group Inc. to possibly acquire all shares of Howard Hughes that Pershing Square does not already own. Currently, Pershing Square's funds hold a 37.6% stake in Howard Hughes.
The proposed deal would allow Ackman to expand Howard Hughes, known for its master-planned communities and retail properties. Ackman plans to reinvest the company's cash into operational businesses, emulating Warren Buffett (Trades, Portfolio)'s investment strategy at Berkshire Hathaway.
Following the announcement, Howard Hughes' stock surged 9.5%, closing at $78.62. Ackman has stated that he expects all current employees of Howard Hughes to remain with the company. The senior leadership team will be led by Pershing Square executives, with Ackman serving as Chairman and CEO.
