Hedge fund manager Bill Ackman is used to getting his way, and CEOs have been finding it more and more difficult in recent years to resist his wiles.
Mall operator General Growth Properties (GGP), and its majority owner Brookfield Asset Management, have been feeling the heat as they oppose Ackman's attempts to force a sale to rival Simon Property Group (SPG).
Ackman turned the heat up Monday afternoon, when he took to the stage at the Value Investing Congress in New York to not only explain why General Growth Properties should sell to Simon but also to offer his behind-the-scenes account which seemed explicitly designed to bring on a host of shareholder lawsuits. Some of what he presented Monday had been previously revealed in a letter with the SEC in late August.
At Monday's conference, he described an entrenched board explicitly ignoring conflicts-of-interest with majority owner Brookfield Asset Management, which appears to want to keep the company independent simply to keep collecting management fees from their portfolio of shopping malls.
Once again, Ackman urged General Growth Properties to enter into a sale process with Simon Property, hire an outside investment banking firm for a potential sale, and an outside committee to look for conflicts of interest.
Simon Property Group's CFO recently said that despite some behind the scenes talks last year about a possible buyout, Simon isn't interested in buying General Growth. Still, Ackman told the audience to ignore what the company says. Ackman showed a slide full of instances when Simon said it wouldn't buy a company but later turned around and bought the same company.
Simon Property Group is the world's largest mall operator with a track record of buying up competitors. Should Simon Property Group buy General Growth, shareholders could see a 50% increase from its current $19 price, said Ackman. That premium would come if General Growth's shareholders got a 28% slice of the merged entity.
A so-called activist investor (also known as a corporate raider), Ackman's hedge fund, Pershing Square, typically buys a stake and urges the board to make his suggested changes or else become engaged in a proxy fight to let shareholders vote on his suggestions.
In his presentation, Ackman showed that boards and executives who resist his wishes will face his wrath.
Ackman doesn't always simply push for a sale. In some cases, he agitates to break up a company or for operational changes -- along with new CEOs to make them.
He's buying into bigger and bigger companies lately and hitting them with his wish-lists.
The biggest so far: Procter & Gamble (PG).
Pershing Square has spent nearly $2 billion acquiring less than a 1% stake in the consumer products company.
Ackman told the audience of the Value Investing Congress that Procter & Gamble's board is putting the company's CEO Robert McDonald on "a short leash." He expects McDonald to try to improve the company's top and bottom lines to keep his job. But if that doesn't work, the board will probably replace him with someone from outside of the company.