Bill Ackman is turning up the heat on Brookfield Asset Management Inc.
The U.S. hedge fund activist, who led a shareholder revolt against the management of Canadian Pacific Railway Ltd., unleashed a new critique on Monday of Brookfield, with whom he has been warring over the fate of a shopping mall company in which they are investors.
Speaking to an audience of investors in New York, Mr. Ackman accused Brookfield of sabotaging a deal to sell the mall operator, General Growth Properties Inc., to a rival to further its own financial interests and said Brookfield misled the company's board into rejecting a sale.
Brookfield's conduct has been "incredibly upsetting," Mr. Ackman said, especially its insistence that it is interested in unlocking the long-term value of the mall company. "It's a bunch of crap," he said. A spokesman for Brookfield declined to comment.
Mr. Ackman's criticism of Brookfield marks a change of tone for the hedge fund manager, who as recently as August wrote in a letter that he had "enormous respect" for the management of the Toronto-based company. Brookfield and Mr. Ackman worked together to rescue General Growth from bankruptcy two years ago.
But the two sides now disagree over next steps at General Growth, one of the biggest owners of shopping malls in the United States. Mr. Ackman wants to pursue a sale of the firm, while Brookfield has said it has no interest in selling. Brookfield owns 42 per cent of the mall giant in stock and warrants, and Pershing Square Capital Management LP, Mr. Ackman's firm, owns 10 per cent.
The escalating rhetoric from Mr. Ackman suggests a fresh effort to influence Brookfield as the one-time partners complete the transformation into adversaries.
One of the most feared shareholder activists in the U.S., Mr. Ackman has a long record of often bitter disputes with large companies to force changes that produce profits for him and his investors.
Earlier this year, he led a successful proxy fight to kick out top executives and board members at CP after accusing them of chronic underperformance. Another company currently in his sights: consumer-goods giant Procter & Gamble Co. Mr. Ackman has amassed a very small stake in the firm – about 1 per cent – but has pushed for management changes and cost cutting.
His dispute with Brookfield is different. Mr. Ackman has accused the real estate giant of trying to acquire control of General Growth on the cheap. He also claimed that Brookfield hindered a potential bid for General Growth from a rival mall operator, Simon Property Group Inc., which would have resulted in gains for shareholders.
On Monday, he took that criticism further, claiming that Brookfield dragged its heels on a transaction with Simon because its holdings in General Growth are a key part of a new spinoff of office properties called Brookfield Property Partners.
Mr. Ackman said he didn't think the disclosures for the spinoff were adequate. "I'm hoping it's unlikely that [Brookfield Property Partners] ever gets off the plate," he said. "The SEC is going to have to take another look at the prospectus."
In a letter to General Growth shareholders last month, Bruce Flatt, Brookfield's chief executive officer, said that his firm believed a sale "at this point would substantially undervalue" the future potential of the mall operator.
The board of General Growth also rejected Mr. Ackman's effort to move the company toward a sale.
Mr. Ackman said that "the board didn't understand what they were being asked" and that it was unduly influenced by Brookfield's representatives and reasoning. "We're going to cause them to think about the question in the right way."
It's unclear where the battle will go from here. "The only thing that has happened is you have a 10-per-cent shareholder who has just voiced an opinion," said Alexander Goldfarb, an analyst at Sandler O'Neill & Partners LP. "As long as Brookfield doesn't want to do a deal, there's no deal."