Simon Makes ‘Best and Final’ Offer

Simon Property Group has issued what it says is a final offer to acquire bankrupt retail REIT General Growth Properties. Simon now says it will pay $6.5 billion for the company, which translates to $20 per share.

May 7, 2010
By Allison Landa

Courtesy Flickr Creative Commons user LancerE

Simon Property Group has issued what it says is a final offer to acquire bankrupt retail REIT General Growth Properties. Simon now says it will pay $6.5 billion for the company, which translates to $20 per share.

Moreover, Simon has also increased its offer to sponsor a GGP recapitalization, saying it would increase the price per newly issued GGP share to $11.

“These offers are best and final,” Simon chairman and CEO David Simon wrote to GGP’s Board of Directors. “SPG will not participate in the bidding process in the GGP bankruptcy proceeding in any way once GGP commits to issue the warrants associated with the latest Brookfield-sponsored plan.”

Simon asserted that the proposal was superior to Brookfield Asset Management’s plan to help GGP emerge from bankruptcy, comparing Simon’s $6.5 billion offer to the aggregate value of $3.9 billion to GGP shareholders based on the Brookfield proposal. He said that he does not believe that GGP would trade under that plan since it would remain highly leveraged and face what he called “a significant overhang of stock owned by non-long term holders who have no lockups, creating downward pressure on share price.”

Simon also claimed that under the Brookfield plan, GGP would be unable to pay a material cash dividend upon emergence from bankruptcy.

“In contrast, SPG’s strong track record of successfully completing large acquisitions, our history of delivering superior property-level performance and the ability to generate substantial operational synergies ideally position SPG to create the most value with GGP’s portfolio,” he wrote, adding that a Simon buyout is preferable given the company’s strong credit rating, balance sheet, and established track record.

GGP appears today before a U.S. bankruptcy judge to choose between the proposals made by Simon and Brookfield.