(Reuters) -Billionaire investor Bill Ackman said on Monday Pershing Square was increasing its stake in Howard Hughes (NYSE:HHH) Holdings by $1 billion and that the real estate developer plans to buy back shares for an additional $500 million.
The deal would increase Pershing Square's stake in Howard Hughes to somewhere between 61% and 69%, depending on how many investors agree to be bought out, from the 38% it currently holds.
Shares of Howard Hughes, one of Pershing's longest-held investments, closed 9.5% higher at $78.62 on Monday.
Through this deal, the real estate company could become a "modern-day Berkshire Hathaway (NYSE:BRKa) that would acquire controlling interests in operating companies", Ackman said in a letter to the board of Howard Hughes.
Howard Hughes, spun off from real estate investment trust General Growth Properties in 2010, owns and manages commercial, residential and mixed-use real estate in the United States. It had a market value of $3.6 billion, according to data compiled by LSEG.
Under the proposed deal, a Pershing Square unit will buy 11.8 million shares for $1 billion from non-Pershing Square affiliate shareholders of Howard Hughes, while the real estate developer will commence a $500 million share repurchase at $85 per share for up to 5.9 million shares.
"We, like other long-term shareholders and this board, have been displeased with the company's stock price performance," Ackman said in the letter.
Howard Hughes confirmed it had received a proposal from Pershing Square and said its special committee, comprised of independent directors, will evaluate it.
Howard Hughes's shareholders can elect to receive the entire payment in cash or "roll over" all or a portion of their shares into the post-merger company, Ackman said in a letter.
Ackman has been personally involved with Howard Hughes for a decade and stepped down from the company's board in April after having served as its chairman since 2010.