Pershing Square Capital Management, led by Bill Ackman, has agreed to invest $900 million in Howard Hughes Holdings Inc. The transaction involves Pershing Square purchasing 9 million newly issued shares of the real estate firm.
The shares were acquired at a price of $100 each. This represents a 48% premium over the stock's closing price last Friday. The investment increases Pershing Square's ownership stake in Howard Hughes Holdings to nearly 47%.
As part of the agreement, Bill Ackman will become the executive chairman of the Howard Hughes board. Ryan Israel, Pershing Square's Chief Investment Officer, will also take on the CIO role at Howard Hughes.
The investment is intended to enable Howard Hughes to transform into a diversified holding company. The company plans to acquire controlling stakes in operating companies, alongside its core real estate development and Master Planned Communities business. A press release detailed the terms.
Ackman has expressed a goal of modeling the company after Warren Buffett's Berkshire Hathaway conglomerate. He previously stated his intention to build a "modern-day Berkshire Hathaway" with the company.
Howard Hughes Holdings Inc. will pay Pershing Square a quarterly base fee of $3.75 million. An additional quarterly management fee based on changes in the company's market capitalization is also part of the arrangement.
Pershing Square will limit its voting power in the company to 40%, according to the terms announced.
The deal follows previous proposals from Pershing Square. In January, Pershing Square proposed a merger, which was revised in February. The companies entered a standstill agreement in March after the prior offer was deemed unacceptable.
Ackman has a history with the company dating back to his investment in General Growth Properties, which spun off Howard Hughes in 2010. He previously served as chairman of Howard Hughes' board from 2010 until last year.
Bill Ackman said, "We believe that HHH is a superb platform to build a faster-growing, high-returning holding company that will acquire control of companies that meet Pershing Square’s criteria for business quality and durable growth."