Billionaire Investor Bill Ackman Strives to Create the Modern-Day Berkshire Hathaway with Howard Hughes Acquisition

Howard Hughes Shares Surge Amidst Bill Ackman's Major Announcement

Howard Hughes Corporation (HHC) shares witnessed a significant surge in trading on Tuesday after billionaire investor Bill Ackman hinted at a substantial announcement. Ackman's investment firm, Pershing Square, subsequently announced an increased takeover bid for Howard Hughes, raising the offer to $90 per share.

Ackman's Ambitions for a "Modern-Day Berkshire Hathaway"

Ackman has been persistently pursuing Howard Hughes in an effort to establish the company as a contemporary version of Berkshire Hathaway, a diversified conglomerate with a remarkable long-term track record. Founded as a textile company in 1965, Berkshire Hathaway was transformed into a holding company under the stewardship of Warren Buffett and Charlie Munger.

In a preview of Pershing Square's revised offer, Ackman cited Buffett as an inspiration, expressing his long-held aspiration to build a diversified holding company with a similar level of success.

Revised Takeover Proposal and Investor Response

Pershing Square's latest proposal includes an acquisition of 10 million newly issued Howard Hughes shares at $90 per share, exceeding the previous offer of $85 per share made in January. The offer was met with a mixed response, with Howard Hughes shares initially surging but later declining after-hours.

Historical Context: Ackman's Previous Investment in Valeant

Ackman's pursuit of Howard Hughes is not his first attempt to emulate Buffett's investment strategies. In 2015, Pershing Square acquired a stake in Valeant Pharmaceuticals International, with Ackman comparing the company to "a very early stage Berkshire Hathaway." However, Ackman ultimately sold his stake in 2017, reportedly incurring a $3 billion loss.

Analyst Commentary and Shareholder Sentiment

Piper Sandler analysts have expressed skepticism regarding Pershing Square's offer, noting that it falls short of Howard Hughes' net asset value. They suggest that the independent board of Howard Hughes may reject the revised offer, as the company does not require the proposed capital injection.

John Kim, a US real estate analyst at BMO Capital Markets, echoed these concerns, highlighting the lack of clarity regarding Howard Hughes' investment strategy under Pershing Square's ownership.

Conclusion

While Howard Hughes shareholders may have been initially optimistic about Pershing Square's offer, the lukewarm response to the revised proposal suggests that they remain unconvinced of its value. Ackman's ambitions to create a modern-day Berkshire Hathaway continue, but the success of his Howard Hughes acquisition remains uncertain.