Hedge fund management company Pershing Square announced a proposal to merge with Howard Hughes in a Jan. 13 letter, which would see Pershing become a “larger, permanent” owner of the real estate development company.

Two-minute impact

Real estate development company Howard Hughes is the developer of a number of master-planned communities across the Houston region including The Woodlands, Bridgeland and The Woodlands Hills.

According to the letter sent by Pershing Square CEO Bill Ackman to the Howard Hughes Holdings Inc. board of directors, the merger was proposed following an internal stakeholder discussion regarding making Howard Hughes a privately held organization due to investor concerns that the company’s stock value was not increasing at the rate desired by shareholders.

“The company’s stock price performance is obviously extremely disappointing, particularly in light of the high regard we have for this board and the company’s superb management team led by [Howard Hughes Holdings CEO] David O’Reilly and the nearly one thousand employees who work at Howard Hughes, many of whom I have gotten to know over the last more than decade,” Ackman said.


In a statement Jan. 13, Howard Hughes Holdings Inc. confirmed the board’s receipt of the proposal, restating an Aug. 4 remark that the board formed a special committee to explore Pershing Square’s interest in a possible transaction.

“The Special Committee will evaluate the proposal and determine the appropriate course of action and process,” the new statement reads. “No action is required by HHH stockholders at this time.”

In the statement, Howard Hughes declines to comment further on the matter.

“There can be no assurance that the Company will pursue this proposed transaction or any other strategic outcome, and HHH does not intend to comment further on this matter unless and until further disclosure is determined to be appropriate or necessary.”


Why it matters

Howard Hughes acquired The Woodlands in 2011 from The Woodlands Development Company and has overseen a number of major projects in the area since. Howard Hughes is also working on three major construction projects in The Woodlands in 2025, including:However, Ackman said in the letter that the stakeholders did not wish to change the overall organization of Howard Hughes. Pershing Square has been a stakeholder and investor in Howard Hughes since 2012, following acquisition of The Woodlands.

“While HHC would remain unchanged, HHH, the holding company to HHC, would become a diversified holding company,” Ackman said in the letter. “We would expect that HHH and its HHC subsidiary would operate largely independently with oversight from the HHH board and its new senior leadership team. With apologies to Mr. Buffett, HHH would become a modern-day Berkshire Hathaway that would acquire controlling interests in operating companies.”

Brad Bailey, chair of The Woodlands Township board of directors, said in a Jan. 13 statement to Community Impact he had learned about the proposal that day. Howard Hughes is the developer for The Woodlands, which is governed as a special-purpose district by the board of directors.


"I was excited to see that Bill Ackman [proposed to] keep the HHC headquarters in The Woodlands and their senior management team will remain intact," Bailey said. "The Woodlands is a premier community and it’s often used as a template for other HHC developments."

Stay tuned

Ackman said in the letter that Pershing has the capital necessary to complete the merger and was "highly confident" $500 million in bond financing could be obtained.