Bill Ackman’s Pershing Square offers to take over real estate developer Howard Hughes

Bill Ackman’s Pershing Square creates new entity for merger Howard Hughes Holdingsoffering the current owners of the real estate company $85 per share.

“While we are pleased with the significant progress of Howard Hughes Holdings’ business in the more than 14 years since its IPO, we, like other long-term shareholders and this board, have been dissatisfied with the performance of the company’s share price,” he wrote ackman in a letter to the board of Howard Hughes.

Ackman proposed a new subsidiary of Pershing, which currently owns about 38% of Howard Hughes, that would merge with the Woodlands, Texas-based real estate developer.

“Shareholders will be able to receive most of the merger consideration in cash at $85.00 per share, representing a 38.3% premium to the value of the intact stock and an 18.4% premium to last Friday’s closing price, and the remainder of the company after the merger,” the letter said.

Shares of Howard Hughes jumped 11% to $79.67 a share in premarket trading following the news. CNBC has reached out to the company for comment.

Pershing first invested in Howard Hughes in November 2010 with a $250 million rights offering at $47.62 per share. Over the past 14 years, Pershing’s investments have produced 35% of total revenue, or just 2.2% of annual revenue, Ackman said. The company has also paid zero dividends since its inception, he added.

“The performance of the company’s share price is obviously extremely disappointing, especially in light of the high regard we have for this board and the company’s excellent management team, led by David O’Reilly, and the nearly thousands of employees who work at Howard Hughes, many of which I have learned over the last more than ten years,” Ackman wrote in the letter.

Under the proposed deal, Ackman said Howard Hughes would remain intact and continue to lead the current management team led by CEO David O’Reilly.

“We do not intend to make any changes to the HHC organization, its employees or its long-term strategy,” Ackman said. “We expect that all current HHH employees will remain employed as a result of the transaction.”