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Simon Property Revises Merger Deal With Taubman Centers

Simon Property Revises Merger Deal With Taubman Centers

Taubman Centers agreed to a merger price cut, from $52.50 to $43 per share, following Simon’s withdrawal from the merger earlier this year.

Taubman Centers agreed to a merger price cut, from $52.50 to $43 per share, following Simon’s withdrawal from the merger earlier this year.

Credit | Concord Mills - Simon Property Group

Simon Property Group and high-end mall developer Taubman Centers have agreed to a change in their previous merger offer of $52.50 per share for Taubman Centers. The new deal is to avoid a drawn-out legal battle that was planned for this Monday.

The revised deal is $43 per Taubman share compared to the pre-revision price of $52.50 per share.

The two companies had previously reached a deal for the merger in February, but extenuating circumstances from the COVID pandemic pushed the merger in another direction.

Suddenly this promising merger was a threat to Simon’s business, due to the now altered outlook for brick and mortar retailers, which both companies happen to be.

Simon and Taubman have both been hit hard this pandemic, reflected throughout their malls/properties, and through the stock market as well.

The deal involves the Taubman family, whom the company is named after, selling about one-third of their ownership in Taubman, which would leave them with 20% ownership for the company.

Keeping with that original structure, Simon’s new deal allows them to save nearly $800 million through the purchase, at a nearly 20% discount. In addition to the $9.50 share price discount, Taubman Centers has also agreed to not pay a stock dividend before March of next year.

Following Simon’s quick withdrawal from the deal early this year, the two companies were set to go to the Oakland County Supreme Court in Michigan, starting this Monday. This was to settle the cancelled deal.

This deal change is one of a few recent ones brought about by promised mergers and acquisitions, pre-COVID, which were quickly revised or cancelled due to the pandemic’s adverse effects.

Tiffany & Co last month received a 2.6% price cut for a merger with LVHM, bringing down a $16.2 billion deal to about a $15.5 billion merger.

Private firm Sycamore Partners sued L Brands Inc. a large parent company in April, on ground that L Brand’s closure of stores, furloughing, and skipped rent violated their merger agreement. This merger went completely down hill, and eventually the two sides scrapped the entire deal.

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While most of these issues with deals and mergers were due to the pandemic, and its hard hitting effects on brick and mortar real estate, these industries could rebound due to recent news with Coronavirus vaccines. Simon Property Group’s stock jumped double digits across last week, due to successful vaccine news, and much more can happen if this vaccine works successfully.

The merger, having been affected due to the pandemic, might become a plus to the two companies, if vaccines are developed and released successfully. This would allow more people to visit malls and properties owned by these two, helping to boost both struggling businesses.

Disclaimer: I have no positions in TCO or SPG, and do not plan to open such position within the next 24 hours or 7 days. These opinions reflect those of myself, and may not reflect the opinions of the rest of Statural.

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