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Outfoxed Bill Ackman tries to guard mall henhouse

It looks as though Bill Ackman got outfoxed at the mall. The Pershing Square Capital Management boss is upset at how Brookfield Asset Management, a fellow owner of General Growth Properties, raised its stake in the U.S. shopping centre operator. The critique looks self-serving, but Mr. Ackman is on target with his suggestion of what GGP should do next.

Pershing Square is eager to cash out its 10 per cent holding. Since helping GGP exit bankruptcy in 2010, his hedge fund has made a return of as much as 77 times. Brookfield, however, says it doesn't want to sell. Mr. Ackman claims the Canadian firm is creeping toward control of GGP without paying for the privilege. Brookfield's stake has grown from about 29 per cent in stock and warrants to just over 42 per cent.

The biggest slug of that increase, however, came from buying out another shareholder. And while Mr. Ackman finds the GGP share buybacks and stock dividends that helped Brookfield boost its ownership unseemly, he is protected to some extent. Brookfield's stake in GGP can't exceed 45 per cent and the firm is constrained as to how it can vote for most directors.

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Brookfield seems to have outmanoeuvred Mr. Ackman in another way, too. After he spoke in late 2011 to the chief executive of Simon Property, the biggest U.S. mall owner, about a possible GGP sale, Brookfield took six months to craft a rival takeover plan. Nothing concrete came of it, but the possible involvement of Simon may have frozen it out of bidding independently for some stretch of time.

Clever tactics shouldn't surprise Mr. Ackman, though. In 2010, for instance, he exploited gaps in disclosure rules to surprise the market with a big position in J.C. Penney. Mr. Ackman's new-found enthusiasm for Simon as a buyer is a tad convenient, too. He favoured the bankruptcy deal with Brookfield, criticizing a rival offer from Simon at the time for undervaluing GGP and carrying antitrust risk.

Mr. Ackman's letter to GGP last week suggests he has more angles to play to combat Brookfield, and could even open the door to increasing his own stake.

Meanwhile, GGP's board would do well to heed Mr. Ackman's request to set up a special board committee with its own advisers to determine what's best for all shareholders. Neither of the foxes with big stakes should be guarding this $19-billion (U.S.) hen house.

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