* Decision to back off hinged on Simon's failure to bid
* Pershing Square returns to being passive investor in GGP
* Decision comes as Ackman engages in high profile dispute
By Svea Herbst-Bayliss and Sagarika Jaisinghani
Jan 3 After months of trying to play matchmaker
between the two largest U.S. shopping mall operators, activist
investor William Ackman reversed course on Thursday, saying he
is no longer pushing for a sale because one party didn't want to
Since late August, Ackman has argued publicly and often that
No. 1 mall operator Simon Property Group (SPG) should
bid for slightly smaller rival General Growth Properties
(GGP), the second-largest mall operator after Simon first
made noise about a possible bid for GGP in 2011.
But with no signs of a deal, Ackman, whose $11 billion
Pershing Square Capital Management owns an 8 percent stake in
GGP, declared himself satisfied with the status quo and said he
would return to being a passive investor.
Ackman is retreating on the mall operators at a time he is
devoting fresh energy to other assets in his portfolio and the
decision may foreshadow an eventual exit from GGP.
"The announcement this morning makes sense because Bill
Ackman has been making a lot of headlines lately and sometimes
it is good to be seen in a quieter light," said one investor in
Pershing Square who did not want to be identified because the
fund is private. "You can only push an investment thesis so far,
and I suspect that reading between the lines here, Ackman is
beginning to prepare to try and get out of this name as smoothly
as possible," the investor added.
Only a few weeks ago, Ackman made a huge splash when he
publicly announced that Pershing Square is shorting supplements
company Herbalife's stock after research suggested to
him and his analysts that the company is operating a pyramid
For Ackman, the efforts with the mall operators were close
to his heart. Pershing Square's investment in GGP still ranks as
the fund's most lucrative ever, providing a 77-fold return after
the stock was bought years ago and held through bankruptcy.
A sale to Simon would have helped push GGP's stock price
even higher and perhaps prevented Brookfield Asset Management
, which owns a 42 percent stake in GGP, from taking
full control without paying for it, Ackman argued in regulatory
filings and at public conferences.
In October, Ackman said that if a deal were closed between
Simon and GGP at that time, the stock price should be trading at
$29 a share by year's end.
But General Growth's shares rose only 9 percent since Ackman
first urged the company to consider a sale. On Thursday the
stock fell 2.9 percent to $19.46.
So in retreating, the New York-based hedge fund manager,
known for telling some of America's biggest companies how to
make more money for shareholders, explained that the reason for
the change of heart hinges largely on Simon.
"In that SPG has chosen not to go forward with that or any
other potential transaction with (GGP), and Brookfield Asset
Management Inc. and its affiliates have subsequently agreed to
modify Brookfield's governance arrangements with (GGP), the
Reporting Persons (Ackman and Pershing Square) no longer believe
that (GGP)should consider a sale of the Company and it should
therefore remain an independent publicly traded corporation,"
the filing said.