Bill Ackman’s Pershing Square offers to take over real estate developer Howard Hughes

Bill Ackman’s Pershing Square offers to take over the rest of Howard Hughes Holdings the investment firm does not hold $85 per share.

“While we are pleased with the substantial business progress made by Howard Hughes Holdings in the 14 years since its IPO, we, like other long-term shareholders and this board, are dissatisfied with the performance of the company’s stock price,” Ackman wrote in a letter to the Howard Hughes board of directors.

Ackman proposed creating a new subsidiary of Pershing, which currently owns about 38 percent of Howard Hughes, that would merge with the real estate developer based in The Woodlands, Texas.

“Shareholders would have the option to receive more than the majority of the merger price in cash at $85.00 per share – representing a 38.3% premium to the unaffected stock price and a premium 18.4% from last Friday’s closing price – and the company’s post-merger inventory balance,” the letter said.

Shares of Howard Hughes jumped 11% to $79.67 per share in premarket trading following the news. CNBC is reaching out to the company for comment.

Pershing first invested in Howard Hughes in November 2010 in a $250 million rights offering at $47.62 per share. Over the past 14 years, Pershing’s investment has produced a total return of 35 percent, or a compound annual return of just 2.2 percent, Ackman said. The company has also not paid any dividend since its inception, he added.

“The Company’s stock performance is obviously extremely disappointing, particularly in light of the high regard we have for this Board of Directors and the Company’s superb management team led by David O’Reilly and the nearly a “Thousand employees who work at Howard Hughes, many of whom I have gotten to know over the past decade,” Ackman wrote in the letter.

Under the proposed deal, Ackman said Howard Hughes would remain unchanged and continue to be led by the current management team led by CEO David O’Reilly.

“We do not intend to make any changes to the HHC organization, its people or its long-term strategy,” Ackman said. “We expect all current HHH employees to remain employed following the transaction.”