Billionaire investor Bill Ackman said Monday that Pershing Square will increase its stake in real estate giant Howard Hughes Holdings by $1 billion in a bid to create “a modern-day Berkshire Hathaway.”
The deal would raise Pershing Square’s stake in Howard Hughes to somewhere between 61% and 69%, depending on how many investors agree to be bought out, from the 38% it currently holds.
“With apologies to Mr. Buffett, HHH would become a modern-day Berkshire Hathaway that would acquire controlling interests in operating companies,” the 58-year-old Ackman, who is worth an estimated $9.2 billion, wrote in a letter to investors on Monday.
Shares of Howard Hughes, one of Pershing’s longest-held investments, shot up 9.5% to $78.62.
Under the proposed deal, a Pershing Square unit will buy 11.8 million shares for $1 billion from non-Pershing Square affiliate shareholders of Howard Hughes, while the real estate developer will commence a $500 million share repurchase at $85 per share for up to 5.9 million shares.
Ackman said any excess cash left on the books of the new entity or generated by the transaction would be used to invest “in new companies and assets.”
Buffett, who is estimated to have a net worth of $148 billion, making him the eighth richest man in the world, started investing in textile manufacturer Berkshire Hathaway in 1962, before turning it into one of the most successful investment funds of all time.
Howard Hughes, spun off from real estate investment trust General Growth Properties in 2010, owns and manages commercial, residential and mixed-use real estate in the United States. It had a market value of $3.6 billion, according to data compiled by LSEG.
Ackman called HHH’s stock market performance “extremely disappointing” and said he would appoint himself as chairman and chief executive of the new investment vehicle.
“We, like other long-term shareholders and this board, have been displeased with the company’s stock price performance,” Ackman said in the letter.
Howard Hughes did not immediately respond to a request for comment.
Howard Hughes’s shareholders can elect to receive the entire payment in cash or “roll over” all or a portion of their shares into the post-merger company, Ackman said in a letter.
Ackman has been personally involved with Howard Hughes for a decade and stepped down from the company’s board in April after having served as its chairman since 2010.
The company’s current CEO David O’Reilly would stay on as part of a new property unit branded Howard Hughes Corp.
Howard Hughes spun off its entertainment arm, which includes the South Street Seaport and the Las Vegas Aviators baseball team, this past July.
“Ultimately, the lack of recognition by the stock market of HHH’s accomplishments led to our
decision in August of last year to consider taking the Company private,” 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.”
Ackman said that he may invite a “small consortium” of partners to join the deal. They would then have to sign up to a multi-year lockup agreement.
The filings expressing an interest in a deal to buy the rest of Howard Hughes came after last year’s failed IPO on the New York Stock Exchange for Pershing Square USA.
The tycoon nixed plans to float the closed-end fund in July due to a lack of investor enthusiasm. A closed-end fund means shareholders can only pull back if someone else buys their stock.
Ackman, who has supported Democrat politicians in the past, has become a vocal supporter of Donald Trump on Elon Musk’s social media platform X.
He has used his account to blast anti-Israel protests on American college campuses and woke “DEI” hiring policies.
