Bill Ackman's $1B Bid for Howard Hughes: Emulating Berkshire Hathaway

Bill Ackman, the renowned hedge fund manager and CEO of Pershing Square Capital Management, has proposed a $1.5 billion deal to acquire a majority stake in Howard Hughes Holdings (HHH), the real estate giant. The proposed deal values HHH at $1.5 billion and would increase Pershing's stake in the company from 38% to as much as 69%. Ackman has offered $85 per share for HHH, representing a 20% premium over the current stock price and a 38.3% premium over the unaffected stock price. The deal also includes a $500 million share repurchase program.

Ackman's vision for HHH is to transform it into a diversified holding company, similar to Berkshire Hathaway, by acquiring controlling interests in operating companies and other assets. He believes that this strategy will lead to a significant increase in HHH's intrinsic value and high compound annual growth rates in its per-share intrinsic value. Pershing Square's management team and resources would be contributed to HHH, and the company would invest in new opportunities with a long-term perspective.

The proposed deal comes after years of dissatisfaction with HHH's stock performance. Ackman, who has been a long-term shareholder and served as the company's chairman until May 2021, has been critical of the company's stock price performance, which has lagged since its peak in 2014. Pershing Square's investment in HHH has produced a 35% total return over the last 14 years, or a mere 2.2% compound annual return. The company has also paid zero dividends since its inception.

Under the proposed deal, Howard Hughes would remain unchanged and continue to be managed by its current leadership team. However, Ackman would become the CEO and Chairman of the revamped Howard Hughes Holdings, while David O'Reilly, the current CEO, would lead the real estate business under the name Howard Hughes Corp. Master Planned Communities. Pershing Square's management team and resources would be contributed to HHH, providing additional expertise and support for the company's growth and diversification efforts.

The proposed deal has been well-received by HHH shareholders, with the company's stock jumping 11% to $79.67 a share in premarket trading on the news. CNBC was reaching out to the company for comment. Pershing first invested in HHH in November 2010 in a $250 million rights offering at $47.62 per share.

In conclusion, Bill Ackman's proposed $1.5 billion deal to acquire a majority stake in Howard Hughes Holdings is an ambitious move to transform the real estate giant into a diversified holding company, similar to Berkshire Hathaway. The deal, which values HHH at $1.5 billion, would increase Pershing's stake in the company from 38% to as much as 69%. Ackman's vision for HHH involves acquiring controlling interests in operating companies and other assets, with the goal of achieving high compound annual growth rates in the company's per-share intrinsic value. The proposed deal has been well-received by HHH shareholders, with the company's stock jumping 11% on the news.