Pershing Square Capital Management, led by billionaire investor Bill Ackman, announced a significant increase in its stake in Howard Hughes Holdings. The investment firm is injecting $1 billion into the real estate developer, alongside a planned $500 million share buyback by Howard Hughes itself. This strategic move strengthens Pershing Square’s position in the company and signals confidence in its long-term growth potential.
This substantial investment will increase Pershing Square’s ownership in Howard Hughes to between 61% and 69%, depending on shareholder participation in the buyout offer. Currently, Pershing Square holds a 38% stake. Following the announcement, Howard Hughes shares surged 9.5%, closing at $78.62 on Monday.
In a letter to the Howard Hughes board, Ackman outlined his vision for the company, suggesting it could evolve into a “modern-day Berkshire Hathaway,” acquiring controlling interests in various operating companies. This ambitious strategy suggests a significant shift in Howard Hughes’s business model. Howard Hughes, spun off from General Growth Properties in 2010, currently owns and manages a diverse portfolio of commercial, residential, and mixed-use real estate across the United States. With a market value of $3.6 billion, according to LSEG data, the company is poised for potential growth.
The proposed deal involves a Pershing Square subsidiary purchasing 11.8 million shares for $1 billion from non-Pershing Square affiliated shareholders. Concurrently, Howard Hughes will initiate a $500 million share repurchase program at $85 per share, targeting up to 5.9 million shares. This dual approach aims to consolidate Pershing Square’s control while also providing liquidity to existing shareholders.
Ackman acknowledged the company’s recent underperformance, stating, “We, like other long-term shareholders and this board, have been displeased with the company’s stock price performance.” This move aims to address shareholder concerns and unlock value in the company. Howard Hughes confirmed receiving the proposal and indicated that a special committee of independent directors will thoroughly evaluate the offer.
Shareholders have the option to receive full payment in cash or to “roll over” some or all of their shares into the post-merger entity. This flexibility allows investors to choose the option that best aligns with their individual investment strategies. Ackman’s decade-long involvement with Howard Hughes, including his role as chairman from 2010 until April 2024, underscores his deep understanding of the company’s operations and potential.
This strategic investment by Pershing Square represents a significant development for Howard Hughes Holdings. The increased stake and share buyback program signal a strong vote of confidence in the company’s future prospects and could potentially pave the way for a transformation into a more acquisitive and diversified entity. The market’s positive response reflects optimism surrounding this new chapter in Howard Hughes’s journey.
