General Growth to review Ackman letter; shares dip
NEW YORK (AP) — Shares of General Growth Properties Inc. fell Friday, giving back some of the gains they posted the day before after one of its largest shareholders urged the shopping mall operator's board to consider a possible sale of the company.
THE SPARK: On Thursday, William Ackman of Pershing Square Capital Management said in a letter to General Growth's board that he is concerned that Brookfield Asset Management will soon acquire enough General Growth shares to take over the company, without paying its other shareholders a fair price.
In order to prevent that, Ackman said that General Growth's board should form a committee to consider selling the company and help its stakeholders get a fair price for their shares.
On Friday, General Growth issued a statement saying it would review the letter, while Brookfield said that it's not moving to acquire the company and has no interest in selling its current stake.
THE BIG PICTURE: General Growth filed the largest real estate bankruptcy case in U.S. history in 2009 under the burden of nearly $28 billion in debt. It exited bankruptcy with the aid of $6.8 billion in equity commitments from an investor group led by Brookfield. It also worked out a way to pay all creditors in full — a rare outcome in bankruptcy cases.
Brookfield now owns a roughly 42 percent stake in the company, up from 29 percent when General Growth emerged from Chapter 11 bankruptcy protection in 2010. In comparison, Pershing owns about 10.2 percent of General Growth.
The company has other suitors as well. Indianapolis-based Simon Property Group Inc. tried to acquire General Growth while it was under court supervision, and also made a bid to buy it last year.
THE ANALYSIS: Citi analyst Michael Bilerman backed his "Buy" rating and $20 target price for the company, saying that he still thinks the company's shares will continue to rise to levels closer to its peers as its finances improve.
"However, the path may be a bit bumpier given yesterday's 10 percent rally, and our view that Pershing Square (i.e. — Bill Ackman) may simply sell their about $1.6 billion stake after getting re-buffed by Brookfield," Bilerman wrote in a note to investors. "In addition, we do not believe a sale transaction is likely in the near term."
THE SHARES: Down 79 cents, or 3.9 percent, to $19.53 in heavy afternoon trading, after dropping as low as $19.32 earlier in the day.
On Thursday, the company's shares surged as much as 14 percent to $21.12, marking its highest stock price since emerging from bankruptcy protection, before closing at $20.32.