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Ackman ratchets up pressure for General Growth merger

Activist investor Bill Ackman, founder and CEO of Pershing Square Capital Management, says Brookfield Asset Management is blocking a deal to merge General Growth and Simon Property.

EDUARDO MUNOZ/REUTERS

New York activist Bill Ackman is stepping up pressure on General Growth Properties Inc. to consider a merger agreement that he says has been thwarted by Brookfield Asset Managment Inc.

In a letter to General Growth's board, filed Monday with the U.S. Securities and Exchange Commission, Mr. Ackman called for the formation of a special committee of directors to review a merger with rival shopping mall operator Simon Property Group.

The letter accused Brookfield, which owns a 40-per-cent stake in General Growth, of "unfairly expropriating" control of the company and impeding a proposed merger last October with Simon Property that would have paid shareholders a 65-per-cent premium on its then-trading price of $12.70 (U.S.).

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Mr. Ackman said that Brookfield's chief executive officer Bruce Flatt told him in a November meeting that it was not interested in the Simon Property offer and instead wanted to mount their own bid to acquire control of General Growth.

At a meeting last month, Mr. Ackman said Mr. Flatt told him Brookfield was in discussions with an unidentified sovereign wealth fund to help finance a General Growth transaction.

"Over the past 10 months, Brookfield has repeatedly told us that it has been working to put together a transaction that would be comparable or superior to the Simon transaction," the letter said.

Brookfield disclosed last week that it is no longer pursuing a deal.

A spokesman for Brookfield declined to respond to Mr. Ackman's letter. A spokesman for General Growth declined to comment on his request for a special committee.

Mr. Ackman said Brookfield offered in July to acquire about 80 per cent of the 72 million General Growth shares owned by Mr. Ackman's Pershing Square Capital Management at a price of $19 a share, but the offer was declined. Including warrants and swaps, Pershing owns a 10.2-per-cent stake in the mall operator.

"Brookfield is motivated to buy us out because … we are the last remaining significant impediment to Brookfield taking control" of General Property, his letter said.

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In a statement last week, Brookfield cast its discussions about a possible transaction with General Growth as an attempt to satisfy Pershing's desire to sell its stake for a premium.

Mr. Ackman's letter said the statement "mis-characterizes" his talks with Mr. Flatt. "At no time has Pershing Square sought liquidity for its [General Growth] stake in conversations with Brookfield."

Although Simon Property is not in discussions with General Growth, Mr. Ackman said he is "confident" the firm is interested in a merger and that a deal could be negotiated within 60 days. A combined company would be financially stronger and give shareholders the option of retaining a stake in the new entity.

"We find it difficult to understand why anyone other than Brookfield would object to the Simon transaction and why a special committee of the board would not promptly enter into negotiations with Simon," the letter said.

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