Investor Bill Ackman has proposed a strategic merger between a subsidiary of Pershing Square and real estate development powerhouse Howard Hughes Holdings ($HHH), aiming to position the latter as the surviving entity in this potentially transformative arrangement. The investment firm Pershing Square has tabled an offer to acquire approximately 11.76 million shares of Howard Hughes, which it does not already own, at a price of $85 per share.
This proposal signifies a total commitment of around $1 billion, as detailed in a formal communication to Howard Hughes' board. The suggested acquisition price offers a notable premium of 38% over Howard Hughes' stock value observed on August 5, prior to Pershing Square’s announcement of interest in privatizing the company. Ackman articulated that "the ultimately insufficient recognition by the stock market of Howard Hughes' achievements influenced our decision last August to explore the privatization of the company." As the founder and CEO of Pershing Square Capital Management, Ackman's insights on market perception reflect broader concerns in the real estate investment sector. Since that initial consideration, the feedback received from existing shareholders has indicated a preference for long-term investments rather than immediate exits.
This insight has contributed to the firm's revised strategy, which favors keeping Howard Hughes public while increasing its stake, positioning itself as a larger, permanent owner of the prominent real estate entity. The newly proposed framework intends to provide a "highly attractive cash alternative for shareholders who opt to divest" while simultaneously catering to those investors eager to maintain their ownership stakes in Howard Hughes.
Key to this initiative is Pershing Square's commitment to sustaining Howard Hughes' prestigious listing on the New York Stock Exchange. In response to the proposal, shares of Howard Hughes surged by 10% in afternoon trading, reflecting market optimism surrounding the intended merger. The company has not issued any comments in response to inquiries from MT Newswires.
Notably, Ackman's letter reassures stakeholders of Pershing Square's intention to retain Howard Hughes as a forever holding investment. Integral to the merger strategy is an accompanying $500 million stock buyback plan that Howard Hughes would undertake at the same price of $85 per share, which encompasses the purchase of up to 5.88 million shares.
Ackman confirmed that this repurchase initiative would be funded via newly issued bonds. Should the merger be finalized and close successfully, Ackman is poised to ascend to the position of CEO of Howard Hughes. Meanwhile, the current management team, headed by CEO David O'Reilly, will continue to oversee the company's vital real estate subsidiary, Howard Hughes Corp. Price: 78.85, Change: +7.07, Percent Change: +9.85.