Simon’s scuttled deal kills $450m payday for mall family
It looks like the family behind one of the nation’s biggest mall operators won’t be getting their big payday after all.
The Taubman family, which operates a collection of high-end centers, signed a deal in February to sell their 70-year-old company to bigger rival Simon Property Group for $3.6 billion, which would have resulted in a salary of $450 million and left 20% stake in the company. The deal, in which Simon paid 51% above the value of the shares, was seen as a resounding endorsement of physical retail.
Simon said today he would walk out of the deal, just weeks before shareholders vote on the merger. He said the deal explicitly allowed him to cancel the deal if Taubman’s business was disproportionately impacted by the pandemic shutdown. He also faulted Taubman for failing to cut costs and take other steps to soften the blow of the pandemic, which made many shoppers nervous about returning to public spaces.
In a statement, Taubman said he considers the attempted dismissal invalid and will contest it. “Taubman intends to hold Simon to his obligations under the merger agreement and the agreed transaction, and to vigorously contest Simon’s purported termination and legal claims,” the company said. He said he plans to hold the shareholders’ meeting to vote on the merger as scheduled on June 25.
Taubman Centers – which owns the Beverly Center in Los Angeles, The Garden Malls in Palm Beach and The Mall at Short Hills in New Jersey – has many locations in densely populated metropolitan areas that depend on tourists and have been most affected by the coronavirus.
The mall operator‘s shares quickly fell 40%, slashing the value of the family’s $1.1 billion stake to $690 million within hours, before rebounding to more than $900 million. dollars. The company’s major shareholders are family members of founder A. Alfred Taubman – including his three children Robert (the company’s managing director), William (the managing director) and Gayle Kalisman – who together own approximately one-third of the company . Kalisman is not involved in the business.
It’s an eleventh-hour turn of events for a deal that many questioned when shutdown orders were rolled out but expected to come to fruition.
“Given everything that has happened economically since the merger was initially announced in early February and states (i.e. malls) are reopening, we believe that any changes or attempts termination of the agreement would have already taken place,” wrote analyst Piper Sandler. Alexander Goldfarb in a note to clients last week. He now believes that Simon tried unsuccessfully to negotiate a lower price, which led to a stalemate.
The takeover attempt is the latest in a long history of battles between the two groups. Simon and Westfield America made a $1.5 billion takeover bid for the company in 2002 and went public when CEO Robert Taubman declined to commit. They upped the offer to $1.7 billion, but the family didn’t budge. The offer was dropped the following year.
This all seemed like water under the bridge when the new offering was announced earlier this year.
“Over the past few years, David and I have developed a great personal relationship,” Robert Taubman said in a statement, referring to David Simon, CEO of Simon Property Group. He also noted at the time that Simon was “the perfect partner to help us continue our progress”.
The son of Jewish immigrants from Germany, A. Alfred Taubman grew up in Detroit during the Depression and began building shopping complexes in the 1950s as Americans moved to the suburbs. He promoted the mall as a gathering place for friends and families and convinced high-end retailers like Neiman Marcus, Nordstrom and Louis Vuitton that it was the place to be.
When Taubman Centers went public in 1992, it owned or operated 19 malls. Almost three decades later, it has only 23 malls. It has long prided itself on quality over quantity, choosing to devote resources to refurbishing and expanding existing locations rather than expanding its fleet.
Taubman’s two sons have been involved in the family business for decades, with eldest son Robert joining the company in 1976 and quickly rising to CEO in 1990. William joined the company in 1986 after a stint with Oppenheimer & Co. and remains chief operating officer.
For further : How David Simon signaled a month ago that the Taubman deal was dead