Simon Raises Bid for Macerich to $95.50 a Share

Simon Property Group Inc. raised its unsolicited takeover bid for rival mall owner Macerich Co. to about $16.8 billion, calling it a final offer.

Simon, the biggest U.S. mall landlord, offered $95.50 a share, up from $91 on March 9, the Indianapolis-based company said in a statement Friday. The offer will be withdrawn if Simon is unable to meet with Macerich to negotiate terms of an agreement by April 1 at 5 p.m. Pacific time. Simon has said it’s made multiple attempts to discuss its interest, and Macerich has refused to engage in talks.

“We believe our offer is compelling and will deliver significant and immediate value to Macerich shareholders,” Simon Chief Executive Officer David Simon said in the statement. “We encourage the Macerich board to give our proposal the serious consideration it deserves and to take into account the views of Macerich shareholders.”

Macerich has taken steps to thwart a hostile takeover. The Santa Monica, California-based real estate investment trust said on March 17 that it’s staggering the election of directors, which would make it more difficult to oust the board, and adopting a “poison pill” defense that raises the price Simon would have to pay because more Macerich shares would be issued.

In its own statement, Macerich confirmed it received the new proposal and said its board will review it with its financial and legal advisers.

Macerich Resistance

“At this point it’s back in Macerich’s court,” said Jeffrey Langbaum, a REIT analyst with Bloomberg Intelligence. “Either they say ‘OK, let’s talk,’ or ‘No, thank you, that offer’s not high enough.’”

Macerich fell 4.6 percent to $89.21 on Friday, indicating investors expect a deal won’t be reached. Simon has been the only company to publicly make a bid.

“The market’s indicating that the company is gearing up to pass on the bid,” David Auerbach, an institutional REIT trader at Esposito Securities LLC in Dallas, said in a telephone interview.

Simon rose 2.7 percent to $197.34.

In rejecting the earlier offer, Macerich said Simon’s bid failed to reflect the full value of its assets and its growth prospects. The company said it plans to spend $400 million to $500 million annually on development projects over the next five years “that it expects will materially enhance stockholder value.”

West Coast

By buying Macerich, Simon would expand its holdings on the West Coast and add top-tier properties that rarely come up for sale. Macerich owns or has stakes in more than 50 malls, including Tysons Corner Center in Virginia, Fashion Outlets of Niagara Falls in New York and Santa Monica Place in Southern California.

The new bid is valued at $23.2 billion, including the assumption of about $6.4 billion of debt. Simon said Friday that it would not nominate directors to Macerich’s board. Macerich on March 17 said Simon was contemplating the nomination of five candidates.

Under the first proposed deal, Macerich shareholders would have received the equivalent of $91 a share as 50 percent cash and 50 percent Simon stock. In connection with the completion of the proposed buyout, Simon agreed to sell certain Macerich assets to Chicago-based General Growth Properties Inc., the No. 2 U.S. mall landlord.

That takeover offer represented a 30 percent premium to Macerich’s closing price on Nov. 18, the day before Simon disclosed it had taken a 3.6 percent stake in Macerich.

Ontario Pension

Just before the disclosure, Macerich said it bought the shares of five U.S. shopping malls it didn’t already own from a subsidiary of the Ontario Teachers’ Pension Plan Board for $1.89 billion, including the assumption of debt. The purchase price included $1.22 billion of stock issued to the pension plan, or an ownership of almost 11 percent, at $71 a share.

Macerich, founded in 1964 in Ames, Iowa, by Mace Siegel, has also been upgrading its centers, similar to what its mall-landlord peers are doing. Macerich said in a November investor presentation that it can get 8 percent to 10 percent returns on redevelopment and expansion projects. Other possibilities for adding to its properties, such as purchases, buyouts of joint ventures and ground-up development, are limited, the company said in the presentation.

General Growth

Simon, which acquired an interest in European mall owner Klepierre in 2012, hasn’t always been successful in trying to complete deals. The REIT failed in an effort to take over General Growth after its smaller competitor filed for bankruptcy in 2009. General Growth left bankruptcy in November 2010 with financing from a group that included Brookfield Asset Management Inc. and Pershing Square Capital Management.

More than a decade ago, Simon and Westfield America Inc. tried to take over Taubman Centers Inc., a luxury-mall owner based in Bloomfield Hills, Michigan. The unsolicited offer was dropped after Michigan enacted a law that let the Taubman family block the transaction.

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