(Reuters) -Billionaire investor Bill Ackman’s Pershing Square Capital Management will buy 9 million newly issued shares of real estate developer Howard Hughes (NYSE: HHH ) Holdings for $900 million, the companies said on Monday.
The agreement will increase Pershing’s stake in Howard Hughes to 46.9% from 37.6% it currently owns, the companies said. Shares of Howard Hughes were up 4% in morning trading.
Ackman plans to use the acquisition to create what he has called a "modern-day Berkshire Hathaway (NYSE: BRKa )," turning the real estate firm into a holding company that acquires controlling stakes in smaller businesses.
"We believe HHH is a superb platform to build a faster-growing, high-returning holding company that will acquire control of companies that meet Pershing Square’s criteria for business quality and durable growth," Ackman said.
Howard Hughes had rejected Ackman’s previous offer of $900 million for 10 million shares, which would have raised Pershing’s stake in the company to 48%, calling the proposal "not acceptable in its current form."
Ackman, who began his career as a corporate activist by pressuring companies such as Canadian Pacific Railway (TSX: CP ) to improve performance, was on Howard Hughes’ board for more than a decade and stepped down from chairman’s role last year.
He will now return to Howard Hughes as executive chairman, while Pershing Square’s Ryan Israel is set to assume the role of chief investment officer.
The leadership team at Howard Hughes, led by CEO David O’Reilly (NASDAQ: ORLY ), will remain intact, with expanded roles and responsibilities, while other employees will see no changes.
Pershing Square has agreed to cap its voting power in Howard Hughes at 40% and limit its beneficial ownership to 47%, the companies said on Monday.