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Taubman Agrees on Merger Deal with Simon; Initial Deal Revised by $800 Million Price Cut

Taubman Agrees on Merger Deal with Simon; Initial Deal Revised by $800 Million Price Cut

One of the country’s largest mall owners, Simon Property Group, has renegotiated a lower price in its merger deal with luxury mall owner, Taubman Centers. The deal had courted controversy during the early part of the year and had almost been called off due to the coronavirus pandemic.

The companies announced Sunday that Simon will now pay $43 per share for controlling interest in Taubman – an 18% decrease from the initial price of $52.50 per share when talks began in February. The coronavirus pandemic had affected retail business which had been forced to shut down for some period due to the government’s lockdown measure. When this happened, negotiation stalled between both parties, in a deal that was valued then at $3.6 billion.

With Simon wanting out of the original deal, both parties were headed for the Oakland County Superior Court in Michigan. The trial proceedings were slated to commence on Monday.

The Simon Property Group said it wanted to exercise its contractual rights to back out of the deal because Taubman had, amongst other things, become adversely affected by the pandemic and that the venture was piling up debts instead of cutting costs. Taubman filed a counterclaim and a legal battle was set to ensue.

The new deal retains part of the clause wherein the Taubman family will sell one-third of its interest in the company while remaining a 20% partner in the Taubman real estate subsidiary. The deal has been approved by the board of directors of both companies and every other detail is expected to be finalized next month or early next year.

With the new deal, Simon will save close to $800 million. Taubman will also not be declaring or paying a common stock dividend before March 2021, CNBC reports.

The pandemic had caused many malls to lose huge revenues as customers turned to online stores for their needs, in line with the government’s directives. So dire was the situation that key mall tenants such as J.C. Penny, Neiman Marcus, and J.Crew all filed for bankruptcy this year.

Tennessee-based CBL Properties and Pennsylvania’s Real Estate Investment Trust were the other two mall investors who filed bankruptcy claims this month.

Simon, headquartered in Indianapolis, owns or has stakes in more than 200 US malls. Taubman, on the other hand, is based in Bloomfield Hills, Michigan, and owns, manages, or leases about 26 shopping centers in the US and Asia.


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