Bill Ackman says he wants build a ‘modern-day Berkshire Hathaway’

Open Editor’s Digest for free

FT editor Rula Khalaf picks her favorite stories in this weekly newsletter.

Billionaire investor Bill Ackman has said he seeks to build a “modern-day Berkshire Hathaway” that oversees companies in an effort to turn his hedge fund into a diversified financial giant.

Ackman’s Pershing Square on Monday offered to buy millions of shares it doesn’t already own in Texas real estate developer Howard Hughes Holdings in a deal worth more than $1 billion.

The proposed purchase is part of an aggressive push akaman to rebuild its hedge fund, which currently buys minority stakes in listed companies, into a major financial group that can compete with powerful private equity buyers and other corporations in large domains.

“My apologies to Mr. Buffett, [Howard Hughes] would become a modern-day Berkshire Hathaway, acquiring controlling stakes in existing companies,” Ackman said in an investor letter on Monday, referring to the company built by Warren Buffett.

Pershing Square is seeking to raise its stake in Howard Hughes to 69 percent from about 38 percent.The hedge fund offered to pay $85 a share, compared to Howard Hughes’ closing price of $71.78 on Monday Up 9.3 percent since Ackman’s announcement.

Howard Hughes is valuable to Ackman because the investor believes the group’s cash flow, property holdings and balance sheet can provide billions of dollars in cash to finance acquisitions.

Under the proposed deal, Ackman would become Howard Hughes’ CEO and also bring in his own investment team to identify takeover targets.

Pershing Square can combine Howard Hughes’ financial firepower with its own funds to find large targets informed by its thinking.The deal requires the approval of a majority of Howard Hughes’ minority shareholders.

Last year, Ackman opened Pershing Square to an outside investor for the first time, selling a 10 percent stake for $10 billion.

Ackman’s proposed acquisition of Howard Hughes is the culmination of more than a dozen years in which Ackman chaired and built the property operator, which was once a collection of properties spun out of mall operator General Growth Properties in a crisis-era bankruptcy.

During the financial crisis of 2008, Ackman bought a large stake in General Growth as it went bankrupt. Ackman and other investors, including Brookfield, then recapitalized General Growth and made billions from the real estate recovery.