REBusinessOnline

Simon, Taubman Revise Merger Agreement, Reduce Asking Price by $800M

Menlo-Park-Mall-New-Jersey

Pictured is Menlo Park Mall, one of Simon's properties in New Jersey. The Indianapolis-based mall REIT is working to acquire an 80 percent interest in Taubman Centers at a reduced price.

INDIANAPOLIS AND BLOOMFIELD HILLS, MICH. — Simon Property Group (NYSE: SPG) and Taubman Centers Inc. (NYSE: TCO) have modified their merger agreement to include a new purchase price of $43 per share, enabling Simon to proceed with its acquisition of an 80 percent interest in Taubman.

CNBC reports that the decline in the agreed-upon share price from $52.50 per share effectively reduces the price tag of the deal by $800 million. This announcement comes just as the two regional mall REITs were set to square off in Circuit Court for the Sixth Judicial District of Oakland County (Michigan), litigation that has since been settled.

Analysts at Piper Sandler, a Minnesota-based investment banking firm, expressed surprise at the ability of the two owner-operators to resolve the price disagreement ahead of today’s court hearing.

“We thought any settlement or price cut would occur after the judge’s ruling,” the firm wrote. “Ultimately, Simon Property Group saves approximately $700 million in cash on the recut of the deal, offset by obligatory legal fees, which totaled $18 million in the third quarter. The pushing of the closing until late 2020 or early 2021 is also better timed for the economic recovery.”

“For Taubman, the outcome is better than we would have expected,” the firm noted. “Shareholders get cashed out at a valuation well in excess of current mall multiples, while the company avoids protracted litigation.”

Under the terms of the original agreement, which was consummated in February, Indianapolis-based Simon would have acquired an 80 percent stake in Michigan-based Taubman for $3.6 billion.

While the price tag is now lower, Simon still intends to acquire the 80 percent interest. The modified merger agreement also provides that Taubman will not declare or pay a dividend on its common stock prior to March 1, 2021, and then, only subject to certain limitations and conditions.

In June, Simon moved to terminate the deal, claiming that Taubman had failed to properly adjust its operating costs and capital expenditures in response to COVID-19. The merger is now expected to close under the revised terms in late 2020 or early 2021.

Simon owns approximately 200 properties totaling 240 million square feet in North America and Asia, making it the largest mall REIT in the United States. Taubman owns about 25 malls worldwide.

Following the announcement, Simon’s stock price opened at $79.95 per share on Monday, Nov. 16, up about 7 percent from the closing price of $74.70 per share on Friday, Nov. 13. The company’s stock price remains down from $154.13 per share a year ago. The stock price of Taubman opened at $42.77 per share, up from $35.17 per share a year ago.

Taylor Williams

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