Brookfield, Pershing Square call truce in battle over General Growth Properties

TORONTO – Brookfield Asset Management (TSX:BAM.A) and Pershing Square have called a truce in their dispute over the future of General Growth Properties (NYSE:GGP), which owns shopping malls in the U.S. and Brazil.

Pershing Square — headed by Bill Ackman — had been pushing for a sale of General Growth, a plan that had been opposed by Brookfield, the real estate firm’s largest shareholder.

However, the two have reached a deal that will see Brookfield buy warrants for 18.4 million General Growth shares from Pershing for $271.9 million and agree to limit its voting power at the company on takeover offers for the next four years.

“Brookfield Asset Management is prepared to provide this undertaking to the company in considerations of the undertakings of Pershing Square Capital Management,” Brookfield senior managing partner Cyrus Madon wrote in a letter to the General Growth board.

The potential shares represented by the warrants would account for about a 1.9 per cent stake in General Growth.

Brookfield is the largest shareholder in General Growth with a roughly 38 per cent stake in the company, while Pershing Square holds a nearly eight per cent stake as the second-largest shareholder, according to data compiled by Thomson Reuters.

Under the agreement, Brookfield has agreed to limit its right to vote its shares in excess of 38.2 per cent and will not exceed a 45 per cent stake in General Growth for four years. Pershing Square has agreed to limit its stake in the company to a maximum of 9.9 per cent for the same time period.

Brookfield has also given General Growth’s board of directors 30 days to buy the warrants for the same price it has paid, General Growth said.

The standstill agreement between the two fund managers was dated Dec. 31, but disclosed on Thursday in a U.S. regulatory filing.

In a letter to Brookfield chief executive Bruce Flatt, Pershing Square said it will refrain from “soliciting, proposing or making plans (or assisting or encouraging any third party with any of the foregoing) with respect to any extraordinary transactions . . . for a period of not less than four years.”

Pershing Square — the New York-based fund manager that led last year’s shakeup at Canadian Pacific Railway (TSX:CP) — had been pushing to have GGP sold.

Pershing said it had been in discussions with Simon Property Group Inc, the largest mall owner in the U.S., to acquire GGP at a 65 per cent premium to where shares were trading at the time. But it said Brookfield rebuffed the proposal in order to acquire GGP for itself without paying the premium usually required for a takeover deal.

Brookfield said that it had no plans to buy GGP and nor any interest in selling its stake.

General Growth shares were down 64 cents at US$19.41 in trading on the New York Stock Exchange.

Brookfield shares were down 10 cents at C$36.50 on the Toronto Stock Exchange.