By Svea Herbst-Bayliss and Ilaina Jonas
BOSTON/NEW YORK Aug 27 Hedge fund manager William Ackman turned up the heat on General Growth Properties on Monday, urging the mall operator to enter talks to sell itself to a rival while also assuring other shareholders that he has no plans to sell out in a hurry.
For the second time in less than a week, Ackman, who runs Pershing Square Capital Management and has a taste for telling some of the world's biggest companies how to make more money for shareholders, weighed in on the future of America's second-biggest mall operator.
Five days ago, Ackman wrote a first letter where he urged General Growth to sell itself and perhaps more importantly prevent Brookfield Asset Management, which helped pull General Growth out of bankruptcy in 2010 and now owns a 42 percent stake, from letting it take full control without paying more for it.
On Monday, the hedge fund manager put pen to paper again with a similar but even more direct message, suggesting a sale to No. 1 mall operator Simon Property Group may be the best way forward.
Ackman, by putting his two letters in regulatory filings, has taken public long-running private discussions between the hedge fund manager, General Growth and two potential suitors -- Brookfield and Simon.
"Now that Brookfield has announced that it is no longer interested in pursuing the acquisition of GGP, the Board can quickly determine with minimal effort whether Simon is interested in pursuing a transaction that would be in the best interest of GGP shareholders," Ackman wrote on Monday.
He also said again that General Growth's board needs to be careful about Brookfield taking too much control. "GGP's Board currently has the ability to take steps to prevent Brookfield from unfairly expropriating control from other GGP shareholders," said the letter.
And he said he thinks that Simon, which had already made some noise about buying General Growth last year, would be interested in pursuing the "Transaction on the same or substantially the same terms." In last week's letter Ackman said that Simon was ready to pay shareholders what would have been a 51 percent premium over last week's share price.
Known for writing long letters to captains of industry, Ackman took pains to explain in Monday's missive that he has been in talks with both Simon Chief Executive David Simon and Brookfield CEO Bruce Flatt. And he said he wanted to "clarify" confusion about what the hedge fund really wants to do by taking on the role of middleman.
Last week Brookfield said it was not taking steps to buy General Growth and that Ackman wanted to create liquidity for its interest in GGP.
Having scooped up General Growth stock early and having hung on through bankruptcy, Ackman has already become very rich on General Growth, having earned a 77-fold return on its investment. But that does not mean he is ready to throw General Growth to the sidelines, Ackman insisted.
Indeed on Monday, the Securities and Exchange Commission filing showed that Pershing Square Capital Management, which is up roughly 8 percent this year, bought more General Growth shares, raising its interest to 10.5 percent from 10.2 percent last week.
Pershing Square is so committed that it even rejected Brookfield's offer to buy about 57 million of the hedge fund's shares at a price of $19, "a price which represented a premium to the market at the time", Ackman wrote.
Representatives from Simon and General Growth did not return requests for comment. A Brookfield representative declined to comment.
"You have some very smart, very sophisticated people in the corporate M&A game all pursuing their own best interest," said Jim Sullivan, managing director of REIT research at Green Street Advisors.
Shares of General Growth rose 1.3 percent on Monday to close at $20.02.