Contrarian Corpus
activist letter follow up
2025-01-13 · 14 pages

Howard Hughes Holdings Inc. HHH

N 4 Narrative
V 2 Visual
C 2 Craft
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The three reasons

  1. 1

    14-year total return of only 35% (2.2% CAGR) shows market refuses to recognize HHH's value

  2. 2

    $85/share cash offer is a 38.3% premium to unaffected price and 18.4% to Friday close

  3. 3

    Pershing's 19.4% CAGR track record can compound HHH's excess cash into a Berkshire-style holdco

Primary demands

  • Approve merger of Pershing Square Holdco into HHH at $85/share cash alternative
  • Transform HHH into a diversified holding company ('modern-day Berkshire Hathaway')
  • Install Ackman as Chairman/CEO and Pershing Square senior team as HHH executives (no cash/equity comp)
  • Pay Pershing Square a 1.5% management fee on equity market cap (no performance fees/promote)
  • Leave HHC real estate subsidiary and David O'Reilly's team unchanged
  • Maintain NYSE listing and a public float of at least 13.6 million shares (30.8%)
  • Cap Pershing Square voting power below 50% despite larger economic ownership

KPIs cited

HHH total shareholder return since 2010 IPO
35% total / 2.2% CAGR over 14 years from $47.62 to $61.46 + Seaport spinoff value
Cash offer premium
$85/share = 38.3% premium to unaffected price (Aug 5, 2024) and 18.4% to prior Friday close
Pershing Square ownership post-transaction
Minimum 61.1%, maximum 69.2% of HHH
Pershing Square Funds current stake
37.6% of HHH, to be rolled over
Pershing Square LP/PSH long-term return
19.4% CAGR, 4,017% cumulative, 41.2x multiple of capital since Jan 2004 (net of 1.5% mgmt fee, gross of perf)
S&P 500 comparison
10.4% CAGR, 694% cumulative, 7.9x over same period
Permanent Capital Era return (since Jan 2018)
PSH 25.7% CAGR / 397% cumulative vs S&P 13.8% / 147%
Subprime hedging P&L
$64M carry cost -> $1.1bn proceeds (17.5x multiple of capital)
COVID-19 hedging P&L
$27M carry -> $2.6bn proceeds (93.4x multiple of capital)
Interest rate swaption P&L
Initial tranche $112M -> $1.3bn (11.3x); subsequent $196M -> $1.3bn (6.5x)
HHH drawdown in COVID
Declined 71% from $129.35 to $37.44 (Feb 20 - Mar 23, 2020)
HHH drawdown in 2022
Declined 46% from $101.78 to $55.39 (Dec 2021 - Sep 2022)
Transaction economics
$1bn cash purchase of 11.76M shares + $500M bond-financed buyback of 5.88M shares at $85
Pershing Square employee 'look-through' investment
$900M (Ackman $440M + employees $460M) plus $100M from strategic investors

Pattern membership

Where this document fits across the library's 12 rhetorical / structural patterns.

Notable slides (5)

Notes

Formal take-private/merger proposal letter from Ackman to HHH Board, not a pitch deck. Rhetoric is unusually collaborative rather than adversarial: praises CEO David O'Reilly and the board, reaffirms Pershing's 14-year ownership, and positions the offer as 'all-in forever' rather than a breakup. Core narrative is disappointment with HHH's stock price despite strong underlying business, and a pivot: HHH becomes a 'modern-day Berkshire Hathaway' platform for Pershing to acquire controlling stakes beyond public securities. Kicker/closer uses the Howard Hughes aviator metaphor: 'let's give this bird some wings.' Includes one notable table (Track Record of Defensive Hedging, p.6) and two performance vs S&P charts (p.7, p.8, p.14 appendix). Minimal branding (Pershing logo page 1 only); rest is plain Times New Roman letter format.