Unlock the publisher’s digest free
Roula Khalaf, editor -in -chief of the FT, selects her favorite stories in this weekly newsletter.
Bill Ackman has created a new acquisition machine, filling his longtime aspiration to create a conglomerate like Berkshire Hathaway from Warren Buffett, he announced on Monday.
ACKMAN assumes an effective control of Howard Hughes, a listed real estate development company which he already has in part, with an additional investment of $ 900 million in the group based in Texas. Under the agreement, he will move his strategy to become a diversified conglomerate, buying control issues in public and private enterprises under the investigation of Ackman and his investment team.
Ackman has been working on the agreement for months, but has faced HOWARD HUGHES shareholders’ umbrellas for an unusual management fee that could have been worth tens of millions of dollars a year to his asset management company, Pershing Square. Ackman agreed to mitigate the conditions for the layout of costs, paving the way for the agreement on Monday.
Howard Hughes will pay Pershing Square $ 15 million a year for its investment team, led by Ackman and its investment director Ryan Israel, to hunt acquisitions. He also owes Pershing Square, 1.5% of costs on any increase in the market capitalization of Howard Hughes above the inflation rate.
A special committee trained by the board of directors of Howard Hughes focused on complaints concerning the original conditions. The new arrangement was seen positively by certain major shareholders of Howard Hughes, who had planned to try to block a previous effort launched by Ackman in January.
In this first effort, Ackman had proposed that Howard Hughes pays Pershing square for 1.5% management fees on all its market capitalization gains without obstacle. But the new proposal links the costs to the current market capitalization and the number of shares of Howard Hughes, which means thatkman will not be compensated for having simply issued the new Howard Hughes shares to finance the acquisitions.
“The change in management fees is a fairly significant modification of previous proposals,” a large shareholder told Financial Times. “This is not the perfect agreement, but the special committee listened to some comments,” he said.
However, other shareholders have criticized the low obstacle on ACKMAN costs, instead of it is linked to the S&P 500 or a stricter reference. The agreement did not require shareholders’ vote and concluded on Monday.
ACKMAN created Howard Hughes in 2012 as a way to leave one of his greatest trades, a big bet on the developer of the GENERAL GROWTH PROPERTIE shopping center during the 2008 financial crisis. Instead of selling his actions, ACKMAN took possession of the non -essential properties of General Growth, including major residential developments in Houston, Las Vegas, Maryland and Hawaii.
Ackman has long believed that properties, that public investors have not so far appreciated, can be designed to finance major business controls using their cash flows and tax advantages.
Ackman said in a press release that Howard Hughes’s value was “widely unrecognized” by public shareholders and that it could now become “a superb platform to build a faster and high growth portfolio company”.
