On Monday, Simon Property unveiled its hostile bid to acquire The Macerich Company for roughly $22.4 billion, including debt.
Simon Property, the largest mall REIT, has an enterprise value of $100 billion.
Simon Property offers a 30% premium for Macerich
Simon Property offered on Monday to buy Macerich for $91 a share, or roughly $22.4 billion, once the latter’s debt is included. Indianapolis-based Simon’s offer represents a 30% premium to Macerich’s closing price on November 18, the day before Simon disclosed it had acquired a 3.6% stake in Macerich.
As part of the proposal, Santa Monica, California-based mall landlord’s shareholders would receive the equivalent of $91 a share, as 50% cash and 50% Simon stock, utilizing a fixed exchange ratio. The transaction would include the assumption of about $6.4 billion of debt.
Simon’s offer is also $20 above, or a 28% premium to, the $71 share price underlying the agreement by Macerich’s Board of Directors to issue 10.9% of Macerich’s shares to Ontario Teachers’ Pension Plan in exchange for certain joint venture interests in November 2014.
Simon to sell selected Macerich assets
In its letter sent to Macerich, Simon confirmed its prior discussion regarding Simon’s proposal to acquire all of the outstanding stock of Macerich. Simon also indicated that it has reached an agreement in principle to sell selected Macerich assets to General Growth Properties, the No. 2 U.S. mall landlord, in connection with the closing of the acquisition.
Indianapolis-based Simon, however, clarified that neither transaction financing nor the sale of assets to General Growth will be condition to closing the proposed transaction.
Macerich has a high concentration of West Coast properties. The purchase would significantly increase Simon’s reach in the U.S. Simonalso owns almost a third of European shopping mall owner Klepierre.
Macerich shares jumped 5.5% in pre-market trading in New York.
Underscoring the benefits of its proposal, Simon Property’s chairman and chief executive officer David Simon said in his letter to Macerich: “We believe Simon’s cash and stock offer would bring compelling value to shareholders of both companies. Macerich shareholders would receive a significant current cash premium as well as the long-term upside potential of an investment in Simon, which is widely recognized for its high-quality portfolio and industry-leading operating performance”.
Drawing reference to the previous attempts to acquire Macerich, Simon Property said: “Notwithstanding multiple attempts, including meetings in December 2014 and February 2015 following the disclosure of our investment in November 2014, Macerich has thus far refused to engage in discussions with us regarding the merits of an acquisition by Simon. Considering the substantial benefits our offer provides, we are confident that, given the opportunity, Macerich’s shareholders would accept our proposal”.