Howard Hughes Holdings (NYSE: HHH) stock is soaring on Monday, with shares up by 11% at 10 a.m. ET on a day when the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) are firmly in the red.

Howard Hughes is a developer of master-planned communities, or MPCs. It is the company behind the massive Woodlands community in the Houston area, as well as the Summerlin community just outside of Las Vegas, just to name a couple examples. Management has referred to the company as a real-life version of the popular video game Sim City, and that’s a pretty accurate description.

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Billionaire Bill Ackman has set his sights on Howard Hughes

Bill Ackman, the billionaire investor who operates the Pershing Square hedge fund, has been involved with Howard Hughes since the beginning. He led the 2010 spinoff of the company from General Growth Properties, and has built his stake up over the years, now owning about 38% of the business.

However, with shares producing a 108% total return over a nearly 15-year history (about 5% annualized), the stock’s return has been a disappointment — especially since Howard Hughes’ business is doing well.

Ackman wants the rest

It was reported last year that Ackman was considering an offer for the rest of the company, and we now know what that offer will look like. The short version is that Ackman wants to buy the rest of the company for $85 per share.

The more detailed version is that Ackman wants to form a new subsidiary of Pershing Square that will merge with Howard Hughes. He is offering to spend about $1 billion to buy 11.8 million shares that Pershing doesn’t already own, and also plans to launch a $500 billion share buyback to reduce the public float by another 5.9 million shares.

Current investors will have the option to take $85 in cash, stock in the post-merger company, or a combination of the two. To be clear, the combined company will still be a publicly traded entity, but the key difference is that (depending on how many investors choose cash), Ackman will control more than 60% of the shares.

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Matt Frankel has positions in Howard Hughes. The Motley Fool has positions in and recommends Howard Hughes. The Motley Fool has a disclosure policy.