General Growth Properties Inc.’s board backed the latest financing proposal from a group led by Brookfield Asset Management Inc. in court, rejecting Simon Property Group Inc.’s “best and final” offer. General Growth fell as much as 13 percent in New York trading.
The Brookfield-led plan is better than Simon’s, General Growth President Thomas Nolan said in testimony read in U.S. Bankruptcy Court in Manhattan today. Lawyers for Simon, the largest U.S. mall owner, said the company will withdraw from bidding if U.S. Bankruptcy Judge Allan Gropper approves the Brookfield plan, partly because the stock warrants that accompany it would make Simon’s buyout more expensive.
Under the revision introduced today, Brookfield’s investment partner Pershing Square Capital Management LP would forgo any warrants until General Growth’s reorganization is complete, and Toronto-based Brookfield would increase the strike price on its warrants to $10.75 from $10.50, General Growth lawyer Marcia Goldstein told Gropper. Another partner, Fairholme Capital Management LLC, also would get warrants.
The hearing comes a day after Indianapolis-based Simon stepped up its three-month quest to acquire General Growth by making a $6.5 billion bid for the Chicago-based company. Brookfield’s rival proposal would leave General Growth an independent company.
$20 a Share
Simon’s offer is valued at $20 a share, the company said yesterday in a statement. It consists of $5 in cash, $10 in shares of Simon stock and the distribution of shares in a new company, General Growth Opportunities, valued at $5.
General Growth fell $1.24, or 7.8 percent, to $14.60 at 1:59 p.m. in New York Stock Exchange trading. The shares earlier traded as low as $13.86.
“These offers are best and final,” Simon Chief Executive Officer David Simon said in a letter to General Growth’s board. Simon “will not participate in the bidding process in the GGP bankruptcy proceeding in any way once GGP commits to issue the warrants associated with the latest Brookfield-sponsored plan.”
Pershing Square’s Chief Executive Officer William Ackman responded today with a letter to the General Growth board offering to forgo 17 million interim warrants. Ackman made the offer in an effort to push through Brookfield’s plan, saying Simon’s bid posed antitrust risks because it would link the nation’s two largest mall owners.
Simon estimates the warrants could cost General Growth shareholders $895 million. Ronen Bojmel, a managing director at General Growth’s financial adviser Miller Buckfire & Co., testified today that they would be worth about $688 million.
Simon’s original bid on Feb. 16 would have given General Growth stockholders $9 a share, including $6 in cash. That was turned down as too low. Both that plan and the new one pay all General Growth unsecured creditors, who hold about $7 billion in debt, in full.
General Growth filed the largest real estate bankruptcy in U.S. history in April 2009 after amassing $27 billion in debt making acquisitions. Its properties include New York’s South Street Seaport, Boston’s Faneuil Hall and the Grand Canal Shoppes and Fashion Show in Las Vegas.
The case is In re General Growth Properties Inc., 09-11977, U.S. Bankruptcy Court, Southern District of New York (Manhattan).