By Svea Herbst-Bayliss, Shivansh Tiwary
(Reuters) -Billionaire investor Bill Ackman said on Monday that he raised his stake in real estate company Howard Hughes, realizing a long-held dream of creating a diversified holding company modeled after legendary investor Warren Buffett’s Berkshire Hathaway.
Ackman put another $900 million investment into Howard Hughes, raising his stake in The Woodlands, Texas-headquartered company to 46.9% from 37.6%. The shares climbed nearly 3%.
The company, which has created master-planned communities in places including Texas, Hawaii and Nevada, will now concentrate on buying controlling stakes in smaller businesses.
“We believe HHH is a superb platform to build a faster-growing, high-returning holding company that will acquire control of companies that meet Pershing Square’s criteria for business quality and durable growth,” Ackman said, referring to his hedge fund company Pershing Square Capital Management.
Days earlier nonagenarian Warren Buffett, long one of Ackman’s professional role models, announced plans to step down as Berkshire Hathaway’s chief executive at the end of the year. Ackman and members of his firm were attending Buffett’s shareholder meeting in Omaha where he unveiled his plans.
Ackman began his career as a corporate activist by pressuring companies such as Canadian Pacific Railway to improve performance, and was on Howard Hughes’ board for more than a decade before stepping down from the chairman’s role last year.
He will now rejoin as executive chairman, while Ryan Israel, a Pershing Square partner and its chief investment officer, will also become Howard Hughes’ chief investment officer.
There has been some friction between the company and other shareholders. The company had rejected Ackman’s previous offer of $900 million for 10 million shares, which would have raised Pershing’s stake in the company to 48%, calling the proposal “not acceptable in its current form.”
The leadership team at Howard Hughes, led by CEO David O’Reilly, will remain intact, with expanded roles and responsibilities, while other employees will see no changes.
Pershing Square has agreed to cap its voting power in Howard Hughes at 40% and limit its beneficial ownership to 47%, the companies said.
Ackman has assured investors the move will not impact how his investment portfolios buy and sell stakes in companies. The firm’s flagship Pershing Square Holdings will continue to buy large stakes in large companies, while Howard Hughes will buy controlling stakes in small companies, he said on a conference call in February.
(Reporting by Svea Herbst-Bayliss in Beverly Hills and Shivansh Tiwary in Bengaluru; Editing by Shinjini Ganguli)