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Investing.com -- Shares of Howard Hughes (NYSE:HHH) (NYSE:HHC) fell 4.8% in after-hours trading on Tuesday, following a 6.8% rise during the day’s session. The movement comes in the wake of a new non-binding proposal from Pershing Square Holdco, L.P., the parent company of Pershing Square Capital Management, L.P., to increase its stake in the company.
Pershing Square has proposed to purchase 10 million newly issued common shares of Howard Hughes at $90 per share, a 46.4% premium over the stock’s unaffected price on August 5th, before the announcement of Pershing Square’s intention to consider a potential transaction with Howard Hughes. This acquisition would raise Pershing Square’s ownership from 37.6% to 48%.
The proposal includes a plan for Bill Ackman to become Chairman and CEO of Howard Hughes, with Ryan Israel as Chief Investment Officer and Ben Hakim as President. Additionally, the $900 million cash infusion from the share purchase is intended to support Howard Hughes’s transformation into a diversified holding company, focusing on acquiring controlling interests in both public and private companies.
Despite the significant premium offered and the potential benefits outlined by Pershing Square, the market response in after-hours trading suggests investor caution. The proposal stipulates that Howard Hughes would continue to operate under an independent board, with three additional directors from Pershing Square and one or more new independent directors.
Howard Hughes’s principal subsidiary, Howard Hughes Corporation, is expected to maintain its current strategic direction and senior leadership under CEO David O’Reilly (NASDAQ:ORLY). Pershing Square’s management team plans to oversee the hedging of macroeconomic and other risks that affect the subsidiary’s core real estate business.
Pershing Square has also proposed a services agreement with Howard Hughes, which would include an annual fee of 1.5% of Howard Hughes’s equity market capitalization, paid quarterly. This revised transaction does not require regulatory approvals, a shareholder vote, or financing, suggesting a swift potential conclusion subject to Special Committee and board approval.
A live broadcast hosted by Pershing Square on February 19th will further detail the proposal and include a Q&A session. The broadcast aims to provide shareholders and interested parties with more information about the proposed transaction.
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