Macerich rejects Simon Property’s $22.4B takeover bid

Macerich Co. has rejected an unsolicited takeover bid of more than $20 billion from Simon Property Group Inc., saying it substantially undervalues the mall owner.

Macerich also took measures to thwart its competitor, including 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 shares of Macerich would be issued.

“After careful consideration,” Macerich’s board unanimously determined that the offer “fails to reflect the full value of our portfolio of unique and irreplaceable assets and our positive growth prospects,” Arthur Coppola, the company’s chairman and CEO, said in a written statement Tuesday.

Simon, the largest U.S. mall owner, announced its $91-a-share offer March 9 after being rebuffed by Santa Monica, California-based Macerich privately. Shares of Macerich have since climbed above that price, closing Monday at $94.89, indicating investors expect a higher bid.

Buying Macerich, which owns or has stakes in more than 50 malls, would expand Indianapolis-based Simon’s reach at a time when high-quality retail centers rarely come up for sale. Macerich’s properties include Tysons Corner Center in Virginia, Fashion Outlets of Niagara Falls in New York and Santa Monica Place in Southern California.

Development projects

Macerich 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.”

A message left for Les Morris, a Simon spokesman, wasn’t immediately returned.

There was an expectation Macerich might reject Simon’s offer “either because they believe it undervalues the company’s internal valuation or to elicit a higher bid,” Alexander Goldfarb, an analyst at Sandler O’Neill & Partners, wrote in a March 9 report.

Macerich shareholders would have received the equivalent of $91 a share as 50-percent cash and 50-percent Simon stock under the proposed deal, Simon said in a March 9 statement. The transaction would have been valued at $22.4 billion at the time, including the assumption of about $6.4 billion of debt.

The company’s “scorched earth” rejection of the offer is based on a “rosy view of its future prospects,” Simon CEO David Simon said in a written  statement. “Shareholders should closely examine Macerich’s history of delivering on its forecasts, which pales in comparison to Simon’s long track record of delivering industry-leading results."

The 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. Simon said on March 9 that it had made multiple attempts to discuss its interest, and the company refused to engage in talks.

‘Compelling offer’

“This is a very compelling offer that will enable Macerich stockholders to realize a substantial and immediate cash return while building long-term value through ownership of Simon shares,” David Simon said in a letter to Coppola, included in the March 9 statement.

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.

The deal with General Growth “raises serious antitrust concerns as it is a concerted effort by the two largest companies in the industry to acquire the number three company,” making it necessary to adopt takeover defenses, Macerich said in a separate statement Tuesday.

The company also said it received a letter from Simon indicating the real estate investment trust was contemplating the nomination of five candidates to Macerich’s board.

Before Simon disclosed its Macerich stake last year, Macerich said it bought the share 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.

Klepierre stake

Simon has been developing outlet malls around the world while refurbishing and expanding some of its biggest U.S. malls to boost returns. Simon has also been active in transactions outside the U.S. In 2012, the company acquired an interest in European mall owner Klepierre, based in Paris.

The REIT hasn’t always been successful in trying to complete deals. Simon 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 after fending off an attempted takeover by Simon.Macerich Co. has rejected an unsolicited takeover bid of more than $20 billion from Simon Property Group Inc., saying it substantially undervalues the company.

“After careful consideration,” Macerich’s board unanimously determined that the offer “fails to reflect the full value of our portfolio of unique and irreplaceable assets and our positive growth prospects,” Arthur Coppola, the company’s chairman and CEO, said in a written statement Tuesday.