Brookfield and Pershing Enter Agreement

It looks as though Pershing and $BAM are making nice/nice.

Here is the press release from today….

Press Release:

Brookfield Asset Management Inc. (“Brookfield”) has informed General Growth Properties, Inc. (“GGP”) that affiliates of Brookfield acquired the GGP warrants held by affiliates of Pershing Square Capital Management, L.P. (“Pershing Square”). The warrants represent the right to acquire 18,432,855 shares of GGP common stock, par value $0.01 per share (“Common Stock”). Brookfield has offered the board of directors the ability to acquire, in the next 30 days, the same warrants for the same purchase price paid by Brookfield ($271,884,611). The details of Brookfield’s purchase of warrants from Pershing Square are set forth in the amendment to Brookfield’s Schedule 13D filed today.

In connection with these transactions, Brookfield advised GGP that Pershing Square delivered certain undertakings to Brookfield relating to GGP. Pursuant to Pershing Square’s undertaking to Brookfield, Pershing Square agreed that, for a period of four years Pershing Square will refrain from undertaking any of the types of transactions with respect to GGP that are subject to disclosure under paragraphs (a)-(j) of item 4 of Schedule 13D. Pershing Square has further acknowledged the 9.9% ownership limitation in GGP’s certificate of incorporation and agreed not to acquire shares of GGP, directly or indirectly, that would cause its ownership to exceed that limit. Brookfield further advised GGP that, following the transaction with Brookfield, Pershing Square intends to commence filing further reports regarding its ownership of GGP shares as a passive shareholder on Schedule 13G. Pershing Square’s undertaking to Brookfield is described in the amendment to Brookfield’s Schedule 13D filed today.

Brookfield also delivered a unilateral undertaking to GGP that modifies certain governance arrangements with GGP. Pursuant to such undertaking, Brookfield agreed that, for a period of four years, (i) in connection with any stockholder vote on a change of control transaction recommended by GGP’s board of directors, Brookfield and its affiliates will limit their right to vote shares in excess of 38.2% of the then-outstanding Common Stock, (ii) Brookfield and its affiliates will participate in future repurchases of Common Stock by GGP so as not to exceed their 45% ownership cap, and (iii) Brookfield and its affiliates will not participate in any GGP dividend reinvestment plan unless first requested by GGP’s board of directors. Brookfield’s undertaking to GGP is described in further detail in the letter from Brookfield to GGP dated the date hereof and filed as an exhibit to the Schedule 13D/A filed by Brookfield today.

From $BAM’s 13D/A (link):

On December 31, 2012, BWP entered into a Warrant Purchase Agreement (the “ Warrant Purchase Agreement ”) with Pershing Square, L.P., a Delaware limited partnership, Pershing Square II, L.P, a Delaware limited partnership, and Pershing Square International, Ltd., a Cayman Islands exempted company (collectively, the “ Sellers ”), pursuant to which, in exchange for notes from Brookfield in favor of the Sellers in the aggregate principal amount of $271,884,611.25 (the “ Notes ”), BWP agreed to acquire and purchase from Sellers, and Sellers agreed to sell to BWP (or its designee) warrants to purchase approximately 18,432,855 shares of Common Stock (the “ Pershing Warrants ”), subject to adjustment in accordance with the terms of the Warrant Agreement. A copy of the Warrant Purchase Agreement is attached hereto as Exhibit 20 and is incorporated herein in its entirety by reference thereto. A copy of the form of the Notes is attached hereto as Exhibit 21 and is incorporated herein in its entirety by reference thereto.

In connection with its entry into the Warrant Purchase Agreement, on December 31, 2012 Pershing Square Capital Management, L.P. delivered an undertaking (the “ Pershing Square Undertaking ”) to Brookfield pursuant to which it agreed on behalf of funds managed by it, its affiliates that are investment managers, investment advisors or investment funds and itself to refrain from, directly or indirectly, soliciting, proposing or making plans (or assisting or encouraging any third party with respect to any of the foregoing) with respect to any extraordinary transactions or any matter referenced in (a)-(j) of Item 4 of Schedule 13D in respect of the Company for a period of not less than four years from the date of the Pershing Square Undertaking. Pershing Square also acknowledged that the 9.9% ownership limitation in Article XIV of the certificate of incorporation of the Company is designed to protect the Company’s status as a REIT, and undertook to not acquire shares of the Company, directly or indirectly, through derivatives or otherwise, that would cause Pershing Square’s ownership to exceed such limitation as in effect on the date of the Pershing Square Undertaking. A copy of the Pershing Square Undertaking is attached hereto as Exhibit 22 and is incorporated herein in its entirety by reference thereto.

In consideration of the Pershing Square Undertaking, on December 31, 2012 Brookfield delivered an undertaking to the Company (the “ Brookfield Undertaking ”) pursuant to which Brookfield agreed, with respect to certain “change of control” transactions involving the Company, for a period of four (4) years following the date of the Brookfield Undertaking to limit the number of shares of Common Stock that Brookfield, BRH VI and the Investment Vehicles vote in any stockholder vote with respect to such “change of control” transactions to 38.2% of the then-outstanding Common Stock, and to vote any additional shares in proportion to the aggregate number of shares of Common Stock that are voted in favor of such transaction, that are voted against such transaction and that are entitled to vote and do not vote in favor of or against such transaction. In addition, Brookfield agreed, for such four year period, to participate in Company publicly-announced repurchases of Common Stock on a pro rata basis if required to maintain Brookfield’s ownership below 45% and agreed to have the Investment Vehicles and BRH VI not participate in the Company’s dividend reinvestment plan unless requested to do so by a unanimous consent of the Board, in which case the Investment Vehicles and BRH VI would be entitled, but not obliged to, participate. A copy of the Brookfield Undertaking is attached hereto as Exhibit 23 and is incorporated herein in its entirety by reference thereto.

Brookfield also delivered a letter to the board of directors of the Company (the “ Brookfield Letter ”) offering the Company the ability to acquire the Pershing Warrants for the price paid to the Sellers subject to entry into mutually acceptable definitive agreements and the taking by the Company’s board of directors of all actions required to approve the sale of the Pershing Warrants by the BWP to the Company in accordance with Rule 16b-3 under the Securities Exchange Act of 1934, as amended. A copy of the Brookfield Letter is attached hereto as Exhibit 24 and is incorporated herein in its entirety by reference thereto.

We have to look back what were the gripes each had. Pershing said $BAM was effectively “creeping” its ownership so that they would effectively acquire total control over $GGP. $BAM said they weren’t (even the thickest of folks could see they were).

What does this agreement do?

1- It limits Pershing’s ownership to 9.9% by eliminating any future stock repurchases for 4 years and $BAM buying their warrants ($GGP will end up buying these). It also says that they will “refrain from, directly or indirectly, soliciting, proposing or making plans (or assisting or encouraging any third party with respect to any of the foregoing) with respect to any extraordinary transaction”. Basically, “stop trying to get $SPG to buy us”
2- $BAM has agreed for the next 4 years to not lets its ownership exceed 45% and, more importantly, to vote its shares up to only 38% in the case of a change of control transaction and vote those remaining in accordance with what other shareholders vote.

So, both sides in essence got what they wanted. $BAM’s ownership % is frozen for 4 years and their voting is capped at 38% and Pershing essentially agreed to “stop being a pain in our ass” to $BAM

At the end of the day, Pershing wins on this one. We all know David Simon DESPERATELY WANTS TO OWN $GGP. It is really the only REIT out there he can acquire that would be a large needle mover for $SPG. He has made several offers to do so over the past few years. Yeah, I know, he says he no longer wants to own it but he has also said that countless times before only to make another offer. Trust me, he wants it…..soooo badly. He WILL offer again.

How does Pershing win? Well $BAM now only has 38% of the vote and now must vote their remaining share in accordance with the remaining vote of shareholders. That does mean that is David Simon makes another run at $GGP (HE WILL) and of the majority of the outstanding shareholders want to sell, $BAM’s 38% vote is negated accordingly by that percentage as their excess shares are voted that way.

There isn’t anything here that says David can’t make another offer….(HE WILL) is just says that Pershing can’t assist him. But, if we think about it, $SPG already did a deep dive into $GGP last fall when they last tried to buy it. Not much has changed since then so one has to wonder what help Pershing would even be to them? Now, if $SPG makes another offer and Pershing comes out in favor of it, they can do so simply by stating how they will vote their shares and not be in violation of this agreement.




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