Lawsuit Says Bill Ackman Bullied Howard Hughes Board Into Taking $900M Investment
Pershing Square CEO Bill Ackman threatened to try to oust board members at Howard Hughes Holdings Inc. if they didn't approve his investment firm's $900M offer, a new lawsuit alleges.
The suit accuses the outspoken executive of using coercion and bullying tactics to pressure Howard Hughes directors into accepting a deal that minority investors say handed Ackman “operational and managerial” control of the firm.
The investor group, led by the retirement fund for police and firefighters in Shelby, Michigan, accuse Ackman of making the threats in a private letter to board members that coincided with public attacks on social media.
The goal was to push the board members into approving an investment proposal that failed to maximize shareholder value, the suit alleges.
“The committee — and the rest of the Board — promptly caved in the face of Ackman’s threats to their seats and reputations,” attorneys for the investors wrote in the filing. “The Board agreed to a deal that would transfer control of the company to Pershing “without obtaining a control premium for Plaintiffs and other minority investors.”
The suit, filed Feb. 13, threatens to blow up the May deal in which Pershing Square agreed to pay $10 per share above Howard Hughes’ stock price at the time to buy 9 million newly issued shares. The deal represented a roughly 48% premium on Howard Hughes’ public valuation, but the minority investors argue it was a significant discount to the firm's net asset value.
Pershing Square already owned roughly 37% of Howard Hughes at the time of the deal, which followed a long courtship in which Ackman attempted an outright takeover of the firm as part of a plan to turn the company into “a modern-day Berkshire Hathaway that would acquire controlling interests in operating companies.”
Howard Hughes started out as a spinoff of bankrupt shopping mall REIT General Growth Properties and, in recent years, has grown into a major developer of master-planned projects with a nearly $5B market capitalization.
Ackman was a major investor in Howard Hughes after the collapse of its parent company in 2010 and has been its largest shareholder since 2008. The May deal would have limited Pershing Square's voting power to 40% and its beneficial ownership stake to 47%.
Nonetheless, the lawsuit alleges that the deal would give Pershing substantial control over Howard Hughes’ operations and that the board members should have secured an additional payout to shareholders who were effectively handing over much of their management power.
Pershing Square didn’t respond to Bisnow’s request for comment Monday morning but told Bloomberg the lawsuit was “entirely without merit.” The investment firm and Ackman are listed as defendants along with several other Pershing executives.
The suit alleges that Ackman was “outraged” when a special committee set up to consider Pershing Square’s takeover bid pushed back on the deal terms.
The day before a special board meeting, “Ackman sent an unhinged eight-page letter threatening, among other things, to call a special meeting and run a proxy contest to remove recalcitrant special committee members,” the investors allege.
The lawsuit also faults the deal review process for including Ben Hakim, who joined the Howard Hughes board in 2024 while also serving as a senior executive at Pershing Square. Hakim’s influence on and participation in the deal’s approval violates fiduciary standards, the investors allege across four counts in the class action.
The investors are requesting the class-action case be allowed to move ahead or for the judge in the Court of Chancery of the State of Delaware to accept the claims outright and order appropriate relief ranging from cash compensation to the appointment of a new independent board of directors.
“Standing up to Bill Ackman is not a job for the faint of heart,” the attorneys from Labaton Keller Sucharow representing minority investors wrote in their opening statement.
