General Growth board rejects Ackman call to sell

NEW YORK Mon Sep 10, 2012 7:50pm EDT

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NEW YORK (Reuters) - The board of General Growth Properties Inc (GGP.N) on Monday rejected activist investor Bill Ackman's call for the company to consider selling itself, saying its shareholders would be best served by the company sticking to its current business plan.

"After reviewing your letters and giving the matters you raised serious consideration, the Board has unanimously determined that the best value for all shareholders will be achieved by GGP continuing to execute on its well-conceived business plan," the board said in a letter to Ackman contained in a filing with the U.S. Securities and Exchange Commission.

After the filing, General Growth shares fell 4 percent to $19.78 in after-hours trading, down from their Monday close of $20.60.

Ackman, who runs the $10 billion hedge fund Pershing Square Capital Management and has a 10.5 percent stake in General Growth, urged the mall operator's independent directors to form a special committee to consider a sale. He was not immediately available for comment.

"I think it's over really, but you can never say never with Bill Ackman in the picture," said Jeung Hyun, a portfolio manager at Adelante Capital Management, which owns General Growth shares. "I thought there was a possibility that the board would at least form a special committee."

The board said the company has been delivering better operating performance, with increases in occupancy and rent and the start of a redevelopment program.

"We expect that we will be able to continue to grow our Net Operating Income, Funds From Operation and other financial measures as we execute our business plan," the board said in the letter.

The board last week had scheduled meetings with investment bankers, two sources said, although its reasons for doing so were not clear.

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.

Ackman has pitted himself 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. Its stake is capped at 45 percent, according to SEC filings.

Brookfield Chief Executive Bruce Flatt said in a letter to shareholders on Monday that a sale of GGP at this stage would be too early and "undervalue GGP's future potential."

"The premium which could be realized at a future date will, in all likelihood, be far more significant than what would be achieved in a sale today," he said.

Flatt added in the letter that "this does not mean we should never sell."

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."

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.

Simon was not interested in buying General Growth if Brookfield was not 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.

Ackman is not known for quitting easily and could continue his campaign, Green Street Advisors analyst Cedrik Lachance said.

"The ultimate thing that can be done is a proxy fight, but there are many steps that would be envisioned before doing something this radical," he said.

(Reporting By Ilaina Jonas; Editing by Tim Dobbyn and Andre Grenon)

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