Mall homeowners Simon and Taubman are revising the phrases of the merger with a value reduce of $ 800 million
Escalators climb and board at the King of Prussia Mall, owned by Simon Property Group, the U.S. largest retail store in King of Prussia, Pennsylvania.
Mark Makela | Reuters
Luxury mall owner Taubman Centers has agreed a lower price to team up with the largest mall owner in America, Simon Property Group, the companies said on Sunday, avoiding potentially fierce litigation the holiday.
Under the new contract, Simon is now paying $ 43 per share for Taubman, a decrease of around 18% from the original price of $ 52.50.
The companies also said they had resolved their pending litigation. Simon and Taubman faced each other in Michigan’s Oakland County Supreme Court on Monday to negotiate the controversial deal.
In February, before the coronavirus pandemic hit the US, Simon agreed to buy $ 3.6 billion worth of Taubman, with his eye on Taubman's 26 high-end malls, including a handful in Asia. However, in June, the company announced that it was exercising its contractual rights to terminate the deal. Among other things, Simon argued that Taubman's portfolio of shopping malls suffered more than some of his colleagues during the pandemic due to the lack of tourism and luxury spending.
Taubman quickly countered and the two were brought to justice.
However, the announced revised terms signal that there is hope in the retail real estate industry that traffic in America's best malls will pick up again once a Covid-19 vaccine becomes widespread and consumers regain confidence to return to the stores to shop.
Even before the pandemic, shopping malls had suffered from falling pedestrian traffic as more and more people shopped online and retail and restaurant tenants closed stores or went bankrupt. The pain has been particularly severe from competitive department store chains like Bon Ton and Sears. Two shopping center owners – CBL and Pennsylvania Real Estate Investment Trust – filed for Chapter 11 bankruptcy protection earlier this month.
The new deal will save Simon nearly $ 800 million. Taubman has also agreed not to declare or pay any common stock dividend until March 2021.
The original deal structure, in which Simon will acquire an 80% stake in Taubman while the Taubman family sells around a third of their stake and remains a 20% partner, remains unchanged, according to the companies.
Both Simon's board of directors and Taubman's board of directors have approved the terms of the transaction, which is expected to close later this year or early 2021. It is still subject to the approval of Taubman shareholders.
Simon stocks are down about 50% this year, while Taubman stocks are up about 27%.
Read the full press release here.