Exclusive: General Growth board looking to hire banker

NEW YORK Wed Sep 5, 2012 7:53pm EDT

NEW YORK (Reuters) - General Growth Properties Inc's (GGP.N) board is looking to hire an investment bank, a week after activist investor Bill Ackman stepped up pressure on the No. 2 U.S. mall owner to consider putting itself up for sale, two sources familiar with the matter said on Wednesday.

Ackman, who runs the $10 billion hedge fund Pershing Square Capital Management and has a 10.5 percent stake in General Growth, has urged the mall operator's independent directors to form a special committee to consider a sale.

Investment bankers are making presentations to the board this week, the sources said.

But it could not be learned whether the board was mulling a sale or was hiring a bank as a defensive move.

General Growth spokesman David Keating declined to comment. Ackman was not immediately available for comment.

Shares of General Growth closed at $20.98, up 1.1 percent on the New York Stock Exchange, reversing losses after the news of the board's plan. The company has a market capitalization of about $19.5 billion.

"I do think the board is feeling some pressure to at least explore some of the alternatives because a large shareholder is saying they should," said Jeung Hyun, a portfolio manager at Adelante Capital Management, which owns General Growth shares. "But I don't know what alternatives there are. There isn't a bid on the table."

He said he sees the odds of a deal getting done at one out of three.

A deal could further boost Ackman's returns from General Growth, which has already proven to be his best bet ever, earning a 77-fold return.

But Ackman also has a particularly tough battle on his hands in getting General Growth to agree to seek a sale - and much of it is of his own making.

In 2010, Ackman played a key role in brokering a deal to reorganize General Growth, which at the time was in bankruptcy. The investors, which included Brookfield Asset Management Inc (BAMa.TO), beat out Simon Property Group Inc (SPG.N), the No. 1 U.S. mall operator, in the race to take control of the company.

Now Ackman is squaring off against Brookfield, which owns 42.2 percent of General Growth and has three seats on the board. Toronto-based Brookfield, a long-term investor with $150 billion of assets under management, has said it has no interest in selling its stake.

And in October 2011 Ackman tried to broker a deal for Simon to buy General Growth, according to U.S. Securities and Exchange Commission filings last week.

Ackman's plan was for Simon to buy General Growth for 0.1765 in Simon stock, or about $21 a share at the time, according to the filings.

But Simon was not interested in buying General Growth if Brookfield wasn't on board. Brookfield, at the time, rebuffed the arrangement and said it wanted to buy the rest of the company it did not own, according to the filings.

In the end, no deal materialized.

Brookfield declined to comment. Simon was not immediately available for comment.

Last month, Brookfield said it was "not taking any steps to acquire GGP, nor is it having any discussions with third parties in that regard."

"You have somebody who owns 42 percent of the company who doesn't have to do anything," Adelante's Hyun said. "David Simon doesn't want to cross the Rubicon unless he's invited by the Senate. You have two parties that aren't particularly motivated to change the status quo."

(Editing by Gary Hill and Phil Berlowitz)

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