Macerich Says ‘No’ to Simon Offer

Simon Property finally got its response from The Macerich Co., but it wasn't a favorable one.
Coppola, Arthur

Arthur Coppola, Macerich

Barbra Murray, Contributing Editor

One week after Simon Property’s CEO sent a letter to the CEO of The Macerich Co. expressing his disappointment that the mall REIT had not responded to its unsolicited acquisition offer of $22.4 billion, Simon has gotten its answer, and it’s a quite emphatic ‘no.’

Simon, the largest shopping mall REIT in the country, has proposed to acquire Macerich in a cash and stock deal for $91 million per share and the assumption of $6.4 billion of existing debt. As Arthur Coppola, CEO of Macerich, expressed in a letter to Simon CEO David Simon yesterday, Macerich’s Board of Directors has concluded that the offer “substantially undervalues Macerich and its prospects for continued growth and stockholder value creation” and thusly, “is not in the best interests of Macerich, its stockholders and other constituencies.”

That’s the explanation in a nutshell. Coppola goes on to site a laundry list of factors taken into consideration when making the decision, including what he describes as Macerich’s collection of irreplaceable assets; its fruitful portfolio repositioning over the last two years; and its valuable and well-regarded development pipeline. And the list goes on.

However, Macerich’s justifications go from touting its own attributes to questioning Simon’s. In the letter, Coppola challenges Simon’s claim that his company “has consistently delivered outstanding returns to its shareholders and for a decade has outperformed Macerich in virtually every key operating and financial category.” Coppola retorted that it is not possible for such a declaration to be verified since the company does not reveal separate performance numbers between its malls and outlet portfolios.

Coppola also takes issue with Simon’s contention that there are no legal barriers to closing the proposed deal. “It appears…that you have not given consideration to the serious questions arising under applicable state and federal laws including those raised by your stock accumulation and other issues which present significant obstacles to consummating the transaction that you have proposed,” Coppola wrote. He wraps up the dispatch by asserting that Simon’s partnership with General Growth Properties, also one of the largest mall owner-operators in the U.S., “is problematic and not only stockholder-unfriendly but also raises questions of legality.”

Simon wasted precious little time responding to Macerich’s dismissal of the offer. Simon answers what it describes as Macerich’s “extreme, scorched-earth response” by accusing the REIT of adopting a “poison pill. Simon’s suggestion: “Macerich shareholders should scrutinize the actions and motives of the Macerich Board.”

Let the games begin.

When Simon went public with its proposal earlier this month, more than a few industry analysts speculated that Simon’s offer of $91 per share would probably make its way up to the $100-range by the time the back-and-forth is all over.