I was first introduced to General Growth Partners (GGP) several years ago at a small alumni gathering featuring Pershing Square’s Bill Ackman as the keynote speaker. Amongst other topics, he spoke about the then bankrupt (trading at <$1) company as his ‘top’ idea at the time. This ‘idea’ turned out to be quite profitable for him as he helped the company emerge from Chapter 11. Since then the price has appreciated just a bit and the company has become a darling of this site having engaged in not one, but two spinoffs in the past three years. Robert Chapman of Chapman Capital recently called Ackman’s GGP bet ‘one of the most impressive brains/balls combinations’ he has ever seen. Unfortunately, I just listened to his story and didn’t follow along for the ride.
As an activist, Mr. Ackman helped deliver tremendous value to shareholders, but his involvement in the company is about to change as he recently reached a deal with one of GGP’s largest shareholders, Brookfield Asset Management (BAM), to turn his stake in GGP ‘passive‘. As part of the deal, Pershing Square will sell BAM ~$270m of GGP warrants, which BAM has then agreed to offer up for sale to GGP. Additionally, Pershing and Brookfield both agreed to ownership limits of 9.9% for Pershing and 45% for Brookfield. Pershing also agreed to not go active again for at least four years and will no longer push for a sale of the company. Brookfield’s other obligations and comments can be found in its own SEC filing.
Quite a turn in this story. Despite working so well together in pulling the company out of bankruptcy, the two large GGP shareholders (Brookfield is by far the largest) have recently had some public disagreements regarding the future of the company. Pershing heavily advocated for a sale of the company while BAM wanted to be more patient and invest in a turnaround. Pershing was also concerned about the internal governance within the company given BAM’s outsized stake. Unfortunately for Pershing, according to this 13D filing Simon Property Group (SPG) wasn’t so interested in a deal. Luckily, the governance issue apparently improved enough that the fund was “satisfied with the Board’s oversight of the Company” and as result the fund was comfortable returning “to their status as passive shareholders of the Company.” A rare pullback for Mr. Ackman, but I bet that he was just too busy fighting his numerous other battles such as Herbalife (HLF) and Proctor & Gamble (PG). Only so many hours in a day and so many investments worth crying about. Or maybe he decided that it wasn’t worth fighting in a company that has already made him a ton of money.
In the end, it looks like Mr. Ackman will remain a shareholder of the company (the fund currently owns ~8% of the shares), but just not a vocal one. Not a bad move, especially considering that the company and one of its spinoffs (Rouse Properties RSE) were amongst the top performing 2012 CY spins.
I wonder who his next target will be…
Disclosure: Author currently holds no position in any stock mentioned.