Pershing Square initiates a merger proposal to Howard Hughes (HHH.US) at $85 per share.

Intelligible Finance learned that billionaire hedge fund manager Bill Ackman through Pershing Square proposed a merger of its subsidiary with real estate developer Howard Hughes (HHH.US) at $85 per share. The investment firm offered Howard Hughes shareholders $85 per share, with most of the payment to be made in cash. The rest of the transaction will be paid in stock of the combined company. The cash portion represents a 18.4% premium to the last closing price on Friday.

The letter, posted on the company's website, showed that Howard Hughes shareholders could choose to receive the merger consideration at $85 per share, or roll over all or a portion of their shares "into the combined company." The letter said: "The cash/stock option will be subject to a certain percentage limitation to ensure that the Company maintains at least 13.6 million shares of publicly traded stock, or 30.8% of the Company's issued and outstanding shares at the time of the merger."

The letter also noted that after the closing of the transaction (prior to any investment by the strategic partner), Pershing Square Holdings Corp. and its affiliates will own at least 61.1% and up to 69.2% of the Company's shares (if 5 billion or more shares of public float are exchanged for cash).

As of August last year, Pershing Square was the largest shareholder of Howard Hughes, owning 37.5% of the Company.

The letter said: "We expect that all current Howard Hughes employees will remain after the transaction. In short, we're all in, and we intend to make Pershing Square Holdings Corp.'s investment in Howard Hughes a permanent holding. In other words, we intend to hold Howard Hughes stock forever."