In 1965, Warren Buffett took control of a struggling textile company, Berkshire Hathaway, and transformed it into one of the world’s most successful investment groups.
Sixty years later, Bill Ackman wants to do something similar — but he’s starting with real estate, not textiles.
Ackman’s Pershing Square investment firm has proposed to acquire 10 million new shares of Howard Hughes Holdings (HHH) at $90 each, increasing its stake to 48% from 37.6%, according to a statement on Feb. 18.
If the deal goes through, Ackman will become the company’s chairman and CEO, with Ryan Israel serving as chief investment officer and Ben Hakim as president.
His vision, he says, is to turn Howard Hughes into a “modern-day Berkshire Hathaway” by acquiring controlling interests in high-quality businesses.
“The $900 million cash infusion will enable HHH to immediately begin to pursue the acquisition of controlling interests in public and private companies as part of its new strategy of becoming a diversified holding company,” the statement said.
Howard Hughes Holdings was Bill Ackman’s No. 4 position as of Q4 2024.
Does Howard Hughes Holdings have the potential?
Howard Hughes is a real estate firm specializing in master-planned communities — small, self-sustaining areas that grow into thriving business and residential hubs.
Its major projects include The Woodlands (Houston), Summerlin (Las Vegas), Teravalis (Phoenix), and Ward Village (Waikiki Beach).
“Owning small and growing MPCs that will eventually become large cities in the best pro-business markets in the country is a great long-term business,” Ackman said on X.
“It’s a lot better than a dying textile company,” he added.
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Berkshire now has a $1 trillion market cap, having posted net income of $26.25 billion for Q3 2024.
Howard Hughes Holdings, now a $4 billion market-value company, reported profit from continuing operations of $96.5 million for Q3.
Who is billionaire Bill Ackman?
Ackman is a prominent investing activist: When he considers that a company in which he has invested has underperformed, he urges the board and management to make changes..
In January, Ackman said in a letter to Howard Hughes Holdings that he wanted to merge the company with a new unit of Pershing Square. He said that “[we], like other long-term shareholders and this board, have been displeased with the company’s stock price performance.”
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In 2011, Ackman took a 14.2% stake in Canadian Pacific Railway (now Canadian Pacific Kansas City). He then blamed CEO Fred Green for “poor decisions, ineffective leadership, and inadequate stewardship” and called for Hunter Harrison to replace Green.
He succeeded. Green resigned, Harrison became CEO and the stock price rallied.
But Ackman doesn’t always win.
In 2017, Ackman argued that Automatic Data Processing was “very inefficient” and needed new leadership.
ADP fought back, accusing Ackman of making “false and reckless claims.” The shareholders rejected the three board candidates Ackman put forth, including himself.
Barron’s reports that the Howard Hughes Holdings board might not want to turn the company into an Ackman-controlled copy of Berkshire. HHH showed “improved results in 2024 and rising free cash flow,” the news service reported.
Last November, Howard Hughes stated that it maintained “a strong liquidity position with $400.7 million of cash and cash equivalents.” It said in a presentation that a conservative estimate of its net asset value was $118 a share.
“We don’t see how HHH’s independent board could sign off on this transaction,” Piper Sandler analyst Alex Goldfarb said, according to Barron’s.
That’s “especially as HHH doesn’t need the $900 million proposed capital infusion, while the stock’s lackluster response to the original January 13 Berkshire Hathaway vision suggests existing HHH holders aren’t keen to have their company taken for less than it’s worth.”
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Howard Hughes lost nearly 9% on Feb. 19 after Ackman’s latest announcement, closing at $73.47 a share. It dropped 5.63% in 2024.
The stock is Ackman’s No. 4 holding as of Q4 2024, with a market value of roughly $1.4 billion and accounting for 11.72% of the portfolio.
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