Bill Ackman's investment firm, Pershing Square, has made a strategic move to acquire the remaining shares of Howard Hughes Holdings. This bold offer stands at $85 per share, aiming to consolidate ownership under Pershing's banner. In a significant development, Howard Hughes' shares surged by 11% to reach $79.67 in premarket trading following the announcement. The proposed acquisition was outlined in a letter addressed to the Howard Hughes board, marking a potential new chapter for the real estate developer.
Pershing Square's relationship with Howard Hughes dates back to November 2010 when the firm made an initial investment of $250 million at $47.62 per share. Over the past 14 years, this investment has yielded a total return of 35%, translating to a modest compound annual return of 2.2%. Despite the financial gains, Howard Hughes has not paid dividends since its inception. Ackman acknowledged the firm's performance, stating his disappointment with the company's stock price trajectory despite the high regard for its management and employees.
"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 stated.
The proposed deal envisions the formation of a new subsidiary of Pershing Square, which would merge with Howard Hughes Holdings. This merger aims to maintain stability within the company as all current employees will remain employed, and CEO David O'Reilly will continue to lead the organization. Ackman emphasized his commitment to preserving the current structure and strategy of Howard Hughes.
"We do not intend to make any changes to the HHC organization, its employees, or its long-term strategy," Ackman assured.
Stockholders stand to benefit from this offer, with the option to receive a majority of their merger consideration in cash at $85 per share. This price represents a premium of 38.3% over the unaffected stock price and an 18.4% premium over Friday's closing price. The balance of the consideration will be offered in stock of the post-merger company.
"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," Ackman highlighted.
Currently, Pershing Square owns approximately 38% of Howard Hughes Holdings. Despite expressing satisfaction with the business's progress over the past 14 years, Ackman reiterated his concern regarding its stock price performance.
"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," he expressed.