Bill Ackman Aims To Mimic Buffett, Berkshire Blueprint With $900M Howard Hughes Bet

Pershing Square's Bill Ackman wants to turn Howard Hughes Holdings Inc HHH into a “modern-day Berkshire Hathaway.”

“[When] I came into this business, the first book I read was Ben Graham’s ‘[The] Intelligent Investor.’ The next thing I read was basically Berkshire Hathaway shareholder letters,” Ackman said Monday on CNBC’s Squawk Box.

“I always sort of aspired to build a diversified holding company and turn it into a valuable enterprise and have big shareholder meetings, and all that kind of thing, so I’ve been working on this for a very long time,” he adds.

Pershing Square announced plans to invest $900 million in real estate company Howard Hughes on Monday. Ackman’s firm will purchase 9 million shares for $100 each, representing a stake of 46.9%. The investment will allow Howard Hughes to acquire controlling stakes in “high-quality, durable growth public and private operating companies” while continuing to invest in its real estate development business.

The hedge fund manager will transfer all of Pershing Square’s resources to Howard Hughes. In return, he’ll receive a $15 million annual management fee and an incremental fee based on the company’s market cap growth.

Ackman will become executive chairman of Howard Hughes’ board. Pershing’s Ryan Israel will take over as chief investment officer as the firm transforms into a diversified holding company.

Check This Out: Ackman’s Power Play: Pershing Square Takes Massive Stake In Howard Hughes With 48% Premium

Berkshire owes its success to long-time CEO Warren Buffett, who will step down at the end of the year.

Buffett built a profitable insurance company that served as a “huge enhancement” to the business over time as it essentially generated “free money,” Ackman said.

It’s “highly likely” Howard Hughes will follow the same playbook, he added.

“The benefit of putting an insurance company, or building one inside of a diversified holding company is that it gives you a lot more flexibility in what you can invest the insurance company’s assets in … that model has not gone unnoticed by us,” Ackman said.

Ackman said the new diversified holding company will offer benefits over private equity because the firm will buy companies and hold them for decades instead of constantly changing hands. Howard Hughes will also be able to target smaller companies that wouldn’t move the needle for a firm of Berkshire’s size today, he added.

Over the weekend, Buffett confirmed that he will pass the Berkshire torch to vice chairman Greg Abel. Ackman believes the company will continue to perform well as Abel begins returning capital to shareholders through dividends and buybacks. He also expects Abel to be a “little bit more careful” when it comes to making deals.

“I wouldn’t bet against Berkshire,” Ackman said.

Berkshire shares were down 4.51% at $515.38 at last check Monday. Howard Hughes shares were up 3.83% at $70.06 at the time of publication, according to Benzinga Pro.

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This illustration was generated using artificial intelligence via Midjourney.