Bill Ackman & Updates from Omaha 5/5/25

0:00Bring in show music, please. This is Squawk Pod, and I'm CNBC producer Cameron Costa. On today's episode... Greg should become the chief executive officer of the company at year end. Warren Buffett's big news at the Berkshire Hathaway annual meeting over the weekend. A surprise to all of the directors save Buffett's two children. Billy Idol, I think, would defer to Warren Buffett as the ultimate rock star. Becky Quick is still in Omaha after covering that big weekend for CNBC. I've been going to this meeting for about 20, 21 years at this point. The crowd was bigger than I'd ever seen. And the applause that broke out, a standing ovation.

0:45And on the West Coast, Pershing Square's Bill Ackman joins Andrew Ross Sorkin in L.A. I think it's more likely that we will build an insurance company. In fact, we have a person that is a phenomenal executive in the industry that we're just beginning a conversation with that's intrigued by what we're doing. His$900 million deal for a bigger stake in Howard Hughes, plus what Fed chair Jay Powell might say this week, and much more from the outspoken Harvard alumnus and investor. It's time for a change in leadership in the board at Harvard. It's Monday, May 5th, Cinco de Mayo. Squawk Pod begins right now.

1:24Stand Becky by in 3, 2, 1, cue it, please. Good morning, everybody, and welcome to Squawk Box right here on CNBC. I'm Becky Quick along with Joe Kernan. Andrew is going to be joining us just a little later in the show. Joe's at the NASDAQ market site in Times Square, and I'm here in Omaha, Nebraska, following the Berkshire Hathaway annual shareholder meeting this weekend. We've got plenty to talk about from this weekend. Joe, that big news here, Warren Buffett surprising everyone. just as that meeting was set to adjourn. Greg should become the chief executive officer of the company at year end, and I want to spring that on the directors effectively and give that as my recommendation.

2:11Let them have the time to think about what questions or what structures or anything they want. And then the meeting following that, which will come in a few months, will take action on whatever the view is of the 11 directors. I think they'll be unanimously in favor of it. And that would mean that at year end, Craig would be the chief executive or officer of Berkshire. And that was a surprise, really, not only to all of the shareholders that had gathered, 40 ,000 plus. There were more than 4 ,000 people that had gone into overflow rooms on top of the 40 ,000 capacity within the stadium itself.

3:06But a surprise to all of the directors, save Buffett's two children, Susie Buffett and Howie Buffett, who he had spoken with before that. It was a surprise to Greg Abel, who afterwards, even as late as Saturday night and yesterday, was still, I think, in a little bit of shock at how this had all rolled out to hear it live on the stage, along with everyone else. It was kind of a classic Warren Buffett move, Joe, the idea that he has always treated all of these shareholders as his partners, just as when it was a very small partnership more than 60 years ago. And this was all of them, all of his partners finding out that news at the same time.

3:46I have been going to this meeting for about 20, 21 years at this point. The crowd was bigger than I'd ever seen. And the applause that broke out, a standing ovation through the entire stadium, one person said to me later, you know, he had been to lots of rock concerts and had never seen, had seen a lot of them that didn't get standing ovations like that, that didn't get applause like that, even for their encores. There were some tears that were shed. This is 60 years now that he's been holding these annual meetings as the CEO of Berkshire Hathaway. But we can tell you a little bit of breaking news on this, too.

4:22we can report that the Berkshire Hathaway board did indeed meet yesterday, and they voted unanimously to name Greg Abel as president and CEO come January 1st of 2026. And the board also voted that Warren Buffett will remain chairman as of January 1st, too. So some of these rumors of his retirement have been greatly exaggerated. He said at the time when he was talking that he'd be sticking around. He didn't say in what capacity. And I asked him after the meeting, along with Greg, I ran backstage and asked them about that. They said they still had to talk about that. Greg was still kind of processing what had just happened.

4:59But at that board meeting yesterday, they did vote on that arrangement. And Warren Buffett will remain as chairman. He's 94 years old right now. He is by far the oldest CEO among the S &P 500. I don't think there's anybody else even in their 90s. And this is something that will happen gradually again, this transition to keep Warren Buffett around. He talked a lot this weekend, Joe, about how they have almost$350 billion in cash, and they would love to do some deals, particularly if things get interesting in the markets. So I think that's kind of what they're hoping to get out there at this point, this idea that this is the next step in the transition, but Buffett's not exactly exiting the stage.

5:41He wants Greg to be making all those decisions. He'll have the final say on all these operating costs. I think the board is kind of hoping that he'll be there to help with capital allocation and any big potential deals that come through. But it does give Greg Abel some protection from anybody who looks and says he's not Warren Buffett. Yeah. You knew this day was coming, obviously. And when you call it a surprise, it was a surprise the way he did it, but it wasn't It's kind of surprised to me that he decided to do that. As far as, you know, rock star reception, they have that commercial. Maybe your average CEO is not, shouldn't really be saying that to Billy Idol, but Billy Idol, I think, would defer to Warren Buffett as the ultimate rock star.

6:25I don't think they're trying to think, maybe Jagger, I don't know. Warren definitely could counter those crazy commercials. He is, obviously, certainly a rock star. And you think about, you know, these days, age of retirement and, you know, it used to be 65. And then people said, well, you know, 70 is a totally different age now. I don't know how it happened, but it did. I mean, we're talking someone that was it's going to be 25 years past the age of 70. And he's special and he's still totally with it and everything else. But, you know, when someone said that, you know, he could live to 130. I'm not saying he's not going to.

7:09But even 130, what's that expression? None of us are leaving here alive. So so we are getting out of here. So we know that it's just the way it is. It's the way life isn't. And I mean, he really has given Greg Abel a lot of. Obviously, he's learned at the feet of the master for how long now? I mean, it's been a long grooming. There's a lot of people. It's been 26 years. I think they first met in 1999. A lot of people that might not wait. That investment in Mid-American Energy. So 26 years to be working with them. And and look, this is something that we we knew back in 2021 that Greg Abel was the chosen one, that he was going to be the next CEO because Charlie Munger slipped at the annual meeting that year.

7:56So what was that four years ago? Slipped and said, you know, well, Greg will take care of the culture. And so then, you know, Buffett told us the next day that that is the plan. We talked to Ron Olson over the weekend, a Berkshire board member until this most recent. He just stepped down from the board yesterday. But Ron Olson said that Greg had been the chosen one for years before that. So this has been a very long term transition. Greg Abel has stepped up and taken more and more responsibility. He was vice chairman or he is vice chairman right now in charge of all the non-insurance companies at Berkshire Hathaway.

8:29But he's been playing a bigger and bigger role in terms of some of the capital allocation, too. He went to Japan and was the one responsible for putting this big investment in those five Japanese trading houses. He's got big plans with the energy company after running that and knows about capital allocation and laying things out for big plans, for big projects. And one of the things Buffett talked about over the weekend was the idea that in this country, we don't have enough energy production for the needs that are required and that that could take some help from government, the federal government, to do things that we would normally only do in wartime, where you have 50 different states and lots of local jurisdictions that all have their own rules.

9:07And it's pretty tough to get any new electric grids kind of passed through all of those various regulatory overhangs. I think he was calling for potential of the government to work with a private partnership with industry, too. And they could put some of that cash to work doing that. They've got$350 billion, a lot they'd like to spend it on. But Greg Abel is 62 years old. Your point to 65 used to be the point of retirement. They are looking at Greg Abel as having decades still, hopefully, to run Berkshire. That's kind of the way they look at things around here. Yeah. That's what I was, you know.

9:43Yeah, you're going to be CEO. You just got 26 years to wait, and you'll be 62 years old when you finally ascend to the Pacific. It's all different. So that was my take. When I heard it, I don't know. I said, oh, he's passing the baton finally. And it wasn't as earth shattering. But the way he did it was, obviously, you were there, and it must have been classic Warren Buffett, the way that it was done. He did it on his terms. Yeah. Yeah, without his board even. He did it on his terms. And I think it was, the more I thought about it afterwards, the more brilliant I thought it was. He did it after just holding court in front of tens of thousands.

10:26Yeah, even at the end of the whole thing. That was just live. Yeah, at the end of the whole thing, after doing question and answer for hours, for more than four hours, taking this Q &A, totally unscripted and running with it and proving to the world that he's still got it. He's still all there mentally. and being able to answer all of those questions and talk kind of forever about all of these issues. I think he would have gone for longer. I do want to tell you about a couple of things that happened at the annual meeting before that. Buffett did go on to explain that he doesn't intend to leave the company entirely.

11:01I could be helpful, I believe, in that in certain respects, if we ran into periods of great opportunity or anything. I think that Berger has a special reputation that when there's times of trouble for the government, that we are an asset and not a liability, which is a position that's very hard to have because usually the public and government get very negative on business if there's a time like that. So I think I could—there might be a time when I'd be helpful, but Greg would have the tickets, and he would make, like I said, whether it's acquisitions. I think the board would be more welcome to giving him more authority on large acquisitions, probably if they knew I was around.

12:08But he would be the chief executive, period. Buffett also made sure to tell shareholders that he will not be selling his shares. I have no intention, zero, of selling one share of Berkshire. Half the way it will get given away gradually. I would add this. The decision to keep every share is an economic decision because I think the prospects of Berkshire will be better under Greg's management than mine. And Joe, a lot of reaction to Warren Buffett's announcements coming in from all over the business world. I got something from Apple CEO Tim Cook last night. He was here for the meeting, and Buffett heaped a lot of praise on Tim Cook, saying that Tim Cook had made more money for Berkshire shareholders than Warren himself ever did.

13:04This is what Tim Cook had to say. He said, Warren's a singular figure, and it has been one of the great honors of my life to know him and to learn from him. He has the rarest of combinations, towering leadership and genuine humility. And he does it all with great humor and even greater generosity. His commitment to others and to making the world a better place are an example for us all. Warren's truly one of the wisest men to have ever walked the earth. And I always look forward to the next time I get to talk to him. You can roll over some of the other comments that came in from people like Jamie Dimon and Brian Moynihan.

13:37Obviously, all of them kind of reaching out. And there's been a lot of reflection in just how far they've come and what he's been able to do over 60 years. I saw a statistic, I think it was from The Motley Fool, that talked about how much of his wealth was it. I think 96 % of his net worth was accumulated after his 65th birthday. And that goes to speak to the power of compound interest. And some of his best comments, Joe, I think over the weekend, just in terms of calming investors and the markets, talking about, you know, if you thought April was a big, volatile month and a drop of 15 % in your stock prices, then you probably don't have the right mental attitude for being an investor, that 15 % was nothing to him.

14:27You're down by, you know, at this point, those stocks are up from where they were on Liberation Day. and he pointed out that he's seen Berkshire Hathaway shares decline by more than 50 % in their value over three points over the last 60 years since he took over. And at no time was the company's fortune really substantially changed. So, you know, you ain't seen nothing yet. And this is not, this has all just been average garden variety type stuff we've seen to this point. Well, you obviously have spent a lot more time with him than I have, but I know him pretty well. And I, you know, and I would hear from him and every time I've ever heard from him, And there's always it's always like it's this impish, humorous, sardonic.

15:09Whatever he's ever done with me has always been needling back and forth. You know, he'll send me a I'll say, send me some. He sends me a brick with my name on it or a NetJets card that's useless because there's nothing on it. Or and you've seen pictures with him. when my wife, we were sitting next to him, and pictures of him where he's, like, holding his wallet, you know, trying not to let someone, you know what he's like. He's always been like that. He had a, do you speak French? Whatever, however you say it. He had a love for life, and he's just, he still does. I mean, I'm sounding like he's, I mean, all he's doing is retiring.

15:48He's not going anywhere, but he's such a. Yeah, not retiring either, but just passing the mantle. Passing the mantle. But I'm saying like he's but he's just really I mean, I don't think I've ever had a conversation that wasn't like sort of laced with with humor or needling or something like that. It's really funny. That's why you get along with him so well. Yes. And basketball, you know, when we talk about the final, you know, and he's like, why don't you try it? And I tell him, you know, a million dollars. How about a billion? It's not going to happen. I mean, no one's going to get it. And a billion, you wouldn't even notice if you did do a billion.

16:28Can I just say on that point, he does think they're far more likely to get a winner. And again, his actuarial brain always works on this. But because of the changes that we've seen with NIL and with the players sticking around for the best teams, he thinks it's far more likely that you will see a winner. Someone could get it. Somebody could get it. But the Final Four this year was all first-place teams. No, I know. They literally are changing the odds on how you can win. What do you need? You have to get every single thing all the way through the entire tournament, don't you? No. Somebody won it this year by getting – Yeah, I think he relaxed that a little bit.

17:08Well, that's good. Okay. 32 out of 34. Yeah, 32 out of 34. And I had a conversation with him earlier this year, And he does think that you are far. The odds have changed. You are far more likely to be able to get this than you were 10 years ago. He's classic. I think even on what he has to pay, he's got insurance. Of course, he's got plenty of insurance companies, too. Right. I think he's self-insured at Berkshire. Right. No, he's a character. He's always been. He's just a pleasure, obviously, in so many ways.

17:40But what are you going to do? It's 94. God bless him. Let's all hope. Yeah, I hope I make it past him in terms of retirement. That's my plan coming up. Somebody asked him, somebody asked him, Joe, what he wanted to be known for, because in the past, he's always said he wanted to be known as a teacher. Somebody asked him about that. One of the shareholders this weekend. And his reply was, you know, I want to be known for being for for being very old, for old age. He said that on a lot on his tombstone or something to that. That's what I someone said that he lived to be really, really, really, really old or something.

18:12and obviously is doing it. Cheese will be next. Now's a good time to flag some very exciting episodes on your Squawk Pod feed. The full two sessions of Q &A with Warren Buffett at this year's shareholder meeting, plus CNBC's pregame, postgame, and halftime shows all await you. We have hours of Warren Buffett content, including that big moment that surprised us all. And it's in podcast format, so you can listen wherever you go. Next up on this episode of Squawk Pod, Andrew joins us. He's catching up with a special guest who was also at the Berkshire meeting this weekend. Buffett's been my, you know, one of my most important heroes, certainly in business.

18:55And I would say in life, I wouldn't bet against Berkshire. Pershing Square's Bill Ackman, the Fed, tariffs, and much more right after this.

19:10you're listening to squawk pod welcome back to squawk box i'm here at the nasdaq market site in times square becky quick uh is in omaha following the berkshire hath berkshire hathaway annual shareholder meeting getting ahead of myself and andrew ross orcas now joining us from los angeles welcome joe we got some breaking news to tell you about right now pershing square announcing It has agreed to invest$900 million to acquire 9 million newly issued shares of Howard Hughes Holdings. We've talked about the potential for this transaction before. It is now happening on new terms. The purchase price is$100 per share.

19:45That's a 48 % premium of the stock price as of Friday's close. And this brings Pershing Square's ownership stake from about 37 % to about 47%. Bill Ackman, who has served as chairman of Howard Hughes's board up until last April, is named executive chairman of the board. And Ryan Israel, CIO of Pershing Square, will become CIO of Howard Hughes. The rest of the company's leadership team will remain the same. And importantly, this transaction is an effort for Bill Ackman to effectively get what might be described as permanent capital to try to create an operating business that then he can leverage off of.

20:24He's even described it at some points as the beginnings of a mini Berkshire, if you will. Joining us live from Los Angeles is Pershing Square's CEO Bill Ackman. You're in town for the Milken Institute Global Forum. Yeah, I'd say for Mike, he puts on an incredible conference. And you just came back from Omaha from the Berkshire Hathaway annual meeting. So I want to talk about that as well. But this is big news because this is something that has been in the offing now for several months. You have raised your offer and your stake now. Tell us what's happened and how did we actually get here? So I think it's been in the offing for maybe 30 years, actually.

21:04What I mean to say is, you know, I came into this business. First book I read was Ben Graham's Intelligent Investor. The next thing I read was basically the Berkshire Hathaway shareholder letters. And it tells, you know, the story of Buffett buying control of a textile company and transforming it into a very valuable business over a long period of time. And Buffett's been one of my most important heroes, certainly, in business, and I would say in life. And I always sort of aspired to build a diversified holding company and turn it into a valuable enterprise and have big shareholder meetings and all that kind of thing.

21:39So I've been working on this for a really long time. Now, this specific transaction started actually, again, a long time ago. We bought 25 % of a shopping mall company called General Growth before it filed for Chapter 11. I joined the board. And part of the way to make that company valuable was spinning off all the ancillary assets into a company called Howard Hughes. And then that's now 14 years later. And that business has started with a jumble of assets. And over time, the then management team and most recently David O 'Reilly and team have transformed it into a great business. But a business that has really gone unrecognized, I would say.

22:17by Wall Street. And so it struck us that it would be a pretty, it was actually, there was a cover story in Forbes saying that it was going to turn into the next Berkshire Hathaway that was a decade ago. So the question though is, so you're now going to have almost a controlling stake. Correct. Almost. Correct. It's a little bit actually like Warren Buffett, almost a controlling stake. Correct. The question is, when is it going to produce enough cash, like a Berkshire, effectively, that you can then take that cash and go invest it? So first of all, the MPC business, Just back up. Howard Hughes owns these sort of small cities.

22:49They're called master plan communities, but they're not small. So, for example, we own the Woodlands, which is about the size of Manhattan. We own Summerlin, which is a major 28 ,000-acre small city in Las Vegas, populations of like 130 ,000, 150 ,000 people. And what we do is we own all the land. We sell lots to home builders. Home builders build homes. People move in. And then the company over time builds the amenities builds the community I call it's a bit like Sim City, but in real life and eventually we build high-rise Office buildings and apartment buildings and it's a great business, but it consumes a lot of capital Because you have to keep right building the cities now the cities at a certain point in time get to a level of maturity Where they start actually throwing off cash and that's really where we are with how we're to use today But there's still lots of opportunities to reinvest the cash in the city So Howard Hughes, as a real estate company today, is not going to throw off a lot of cash, to your point.

23:45But five years from now, 10 years from now, it's going to produce more cash that it can generate. Explain how Pershing Square is going to be attached to this. Sure. What your role will be, your CIO's role is now going to be effectively involved in this, how you're going to get compensated. Sure. So first of all, the$900 million is not coming from the Pershing Square funds. It's coming from the Pershing Square Management Company. I own about 45 % of it. The rest of the team owns about 45%, and 10 % is owned by a group of investors. We sold a piece of the business almost a year ago. That's the$900 million of capital that's going into the business.

24:22It's really the new additions to the executive leadership team that is investing the capital. It's great alignment. You hire a new executive chair. You hire a CIO. it's nice to hear that they're investing$900 million when they take the seat. We're not getting any option or stock or actually personally any compensation from the company. The company is getting the benefit not just of Ryan and myself, but I operate with a team, unlike Mr. Buffett, who seems like a bit of a one-man band, and certainly he was when he started at Berkshire Hathaway. I built a team over time, and we work as a real partnership.

25:02Howard Hughes today, couldn't afford to hire the 40-odd Pershing Square team members, the eight investment team members. So we're going to bring all the resources of Pershing Square to Howard Hughes, and we're going to charge a 15, we're going to get paid a$15 million fee, and we're going to get paid a incremental fee to the extent that the market cap of Howard Hughes grows at a rate in excess of inflation. We're going to get a 1.5 % fee on the increase in market cap, basically above today's market cap. Let me finish for a second. And only if the market cap on a per share basis. So if we issue a bunch of stock to make an acquisition, that doesn't increase our fees.

25:40It actually reduces the fees as a percentage. You talked about issuing stock to buy stuff. Yes. Is that how you plan to buy stuff with the stock? Is there going to be enough cash? And would you ever try to buy, for example, an insurance company, which is something obviously Berkshire's done? So we're going to start with 900 million of capital at the holding company that is available to make investments. It is definitely on our, if you look at Berkshire over time, a big part, Buffett's known as a great investor in stocks and companies, but a huge enhancement to his returns over time is that he built a profitable insurance company that generated as a result free money, so-called float.

26:18And he built that, the insurance company was embedded in a diversified holding company. And the benefit of putting an insurance company or building one inside a diversified holding company is that it gives you a lot more flexibility in what you can invest the insurance company's assets in. If you're a pure play insurer, you can't take that much risk. You basically buy fixed income securities. So that model has not gone unnoticed by us. I think it's highly likely that we will build or buy an insurance company. One of the things that has happened is it's become a crowded market, meaning there's a lot of private equity players that are trying to buy up, I imagine, a lot of the stuff that you may want to buy.