Brookfield top candidate to buy out Ackman’s stake in U.S. mall owner: expert

U.S. activist investor Bill Ackman could end up selling his stake in General Growth Properties to Toronto’s Brookfield Asset Management Inc., the largest shareholder of the American mall owner that is the centre of a dispute between the two investors, a retail expert said Friday.

Ackman could be “stirring up the pot” with his letter asking General Growth’s board to form a special committee —independent of Brookfield directors — to look at selling the company, said Howard Davidowitz of Davidowitz & Associates, Inc. in New York.

In the letter filed Thursday, Ackman’s Pershing Square Capital alleges that Brookfield (TSX:BAM.A) last year rebuffed a takeover offer from Simon Property Group that came with a 65 per cent premium in favour of taking over the company itself — though no offer has been forthcoming.

Brookfield, which manages a range of utility, infrastructure and real estate assets, refutes those allegations, saying it has no intentions to either buy GGP, nor sell its existing stake. It has said it’s not taking any steps to acquire GGP nor is it having any discussions with third parties in that regard.

But Ackman’s request for a board review of a potential takeover could lead to an offer to buy out Pershing’s 10.2 per cent stake in Chicago-based General Growth and the top candidate is Brookfield, Davidowitz said.

“Brookfield, they’re perfect to buy him out,” said Davidowitz, chairman of the New York retail consulting and investment banking firm.

“They’re the No. 1 candidate,” he said of Brookfield, which owns 42.2 per cent of General Growth.

Pershing’s letter says Brookfield is not acting in other shareholders’ best interests in its attempts to acquire GGP and in its refusal to consider other offers for the company.

“The letter may lead to other things. To get the highest price if you’re Bill Ackman, you want more than one bid for your stake. He may see value in stirring up the pot,” Davidowitz said.

Ackman — who couldn’t be reached for comment Friday — said in the letter it was in discussion last year with SPG, the largest mall owner in the U.S., to acquire GGP,adding that is still the most likely buyer of the company.

Brookfield is just the most recent Canadian company squaring off against Ackman — earlier this year he waged a successful battle to overhaul management at CP Railway (TSX:CP).

However, Davidowitz also said nothing may come of Ackman’s request to have General Growth sold.

“Ackman demands a lot of stuff that doesn’t get done,” he said, noting Ackman lost money on his investment in U.S. discount retailer Target Corp. and his efforts to turn around retailer J.C. Penney are ongoing.

“In his business, you’re operating with a lot of borrowed money. The faster than you can get something concluded, the better off you are,” he said.

But the challenge is that General Growth — which emerged from bankruptcy in 2010 with 183 malls in 43 states — is now a viable company and Ackman is a short-term trader, he said.

“Real estate is a very long-term investment,” Davidowitz said. “That’s not necessarily consistent with Ackman.”

Brookfield and Pershing Square were both key financiers of restructuring at General Growth.