William Ackman — the most active of activist investors —is trying to engineer a Simon Property Group Inc. takeover of General Growth Properties Inc.
Ackman, who through his Pershing Square Capital Management holds stakes in not only General Growth, but J.C. Penney Co. Inc. and Procter & Gamble Co., has been working on a deal with Simon since October.
Ackman owns 72.2 million shares of General Growth, as well as warrants and cash-settled swaps that gives him control over 10.2 percent of the mall operator. The investor bought into General Growth before the firm filed for Chapter 11 protection in April 2009 and was an active player in the bankruptcy process, ultimately emerging as chairman of The Howard Hughes Corp., a new firm that holds part of General Growth’s former holdings.
Simon and Ackman initially discussed a transaction where Simon would buy General Growth in a stock deal, swapping each share of General Growth for 0.1765 of a share of Simon. The deal would have valued General Growth at $21 a share, a 65 percent premium from trading at the time.
Ackman, who laid out the details of the deal-making in a letter to General Growth’s board that was filed with the Securities and Exchange Commission, took the deal to Brookfield Asset Management, which controls 42.2 percent of General Growth.
Brookfield countered with a series of proposed transactions that Ackman said were complex and raised fiduciary issues. Ackman also said he was not interested in selling his stake in General Growth without a “substantial premium.”
Brookfield said it has “no interest in selling its stake in GGP.”
Ackman asked General Growth’s board to form a special committee to consider a sale of the company and to hire legal and financial advisers. He also asked the special committee to engage with all interested parties and the board to suspend a dividend reinvestment program that effectively increases Brookfield’s stake in the company.
“Because we believe the Simon transaction would be highly accretive to Simon, we would expect Simon stock to increase as a result of transaction synergies, which would deliver even greater value to GGP shareholders,” Ackman said. “This potential premium represents what the value of control is worth to GGP’s shareholders.”
General Growth’s shareholders applauded the call to action and pushed shares of the company up 9.7 percent to $20.32.
Simon’s stock, however, fell 1.4 percent to $156.46.