Melvin Simon estate collects $944M from share sale

Simon Property Group Inc. has settled a dispute with the estate of its late founder Melvin Simon, converting his ownership units into common shares worth $944 million.

The Melvin Simon Family Enterprises Trust sold the shares to the public in an offering managed by Bank of America Merrill Lynch, the company said Thursday in a Securities and Exchange Commission filing.

IBJ first reported the company's plan to sell the shares Wednesday night.

The agreement extracts the publicly traded company from an ongoing battle in Hamilton County over Melvin's more than $2 billion estate. The fight pits Melvin's widow Bren Simon against his children from an earlier marriage: Deborah Simon, Cynthia Simon-Skjodt and Simon Property Group CEO David Simon. 

A jury trial is scheduled for July 2013.

Shares of the Indianapolis-based company declined about 3 percent, to $155.75 in early trading Thursday. It is not uncommon for a company's stock to fall when an offering is made, because such a sale can dilute the value of current shares. 

The ownership units were designed to convert at a ratio of one-to-one with the company's common shares, but the deal converted about 6.5 million ownership units for roughly 5.9 million shares, the company said.

The conversion as executed saves the company more than $100 million. However, it can be seen as a win-win since the estate's take is more than 50 percent higher than it would have been had Bren succeeded in an attempt to convert the units months after Melvin died in late 2009.

When Bren tried to convert the units, Simon Property Group intervened in the estate case, arguing a simmering dispute over the estate proceeds amounted to a lien on the ownership units and prevented conversion.

Hamilton County Superior Court Judge William J. Hughes in December 2010 removed Bren as trustee over her late husband's estate, citing among other reasons her attempt to liquidate the ownership stake without advice from a financial professional.

Hughes appointed former Indiana Supreme Court Justice Theodore R. Boehm to replace Bren as trustee and as Melvin's personal representative.

The conversion of the units—a large chunk, but not all, of the estate's Simon holdings—allows the trust to diversify its assets, preserving the proceeds for all of the trust's ultimate beneficiaries. 

The docket in the estate case suggests Hughes signed off on the deal during a hearing on Monday. The proceedings were sealed, presumably to allow the public company to comply with SEC requirements for dissemination of news concerning insider sales.

The lead plaintiff in the case is Melvin's daughter Deborah Simon, who claims her stepmother coerced Melvin to make changes to his estate plan in February 2009, seven months before he died at age 82.

Bren has claimed in court filings that the changes to the will reflected Melvin’s desire to compensate her for a drop in the company’s stock price and a reduction in the cash dividend.

The company eventually restored the dividend and its stock bounded higher.

Melvin in 1960 co-founded what would become Simon Property Group with his brother Herb. The company went public in 1993.