A deal that could bring together two of the largest mall operators in the United States just took a new, seemingly dead-end, turn. Simon Property Group Inc. (SPG, Financial) raised its earlier offer of $91 per share by 5% to $95.50 per share for Macerich Co. (MAC, Financial) bringing the value of the deal to $16.8 billion. But the "sweeter" deal comes with both a rider, as well as a tight deadline within which Macerich is expected to respond to the new offer. The largest mall owner in the country declared the offer for its second-in-line rival as "final". Simon Property has given Macerich until April 1 to make up its mind.
The Deal
The new deal is valued at $23.2 billion (including $6.4 billion the smaller company owes), which Simon Property would pay for 50% in cash and 50% in common stock. The deal was reportedly set in motion when Simon Property revealed its 3.6% stake in Macerich in November last year. Macerich had held off on the previous offer, three days ago, claiming that Simon Property was attempting to undervalue it. Pointing at Simon Property’s unpublicised deal to sell assets to General Growth Properties Inc. (GGP, Financial), Macerich also alleged that the two larger companies were attempting to buy out the competition. The Associated Press, however, reported that Macerich had issued a statement claiming it will review the new offer.
Analysts and industry watchers are not that optimistic about the deal coming through. Alexander Goldfarb, an analyst from Sandler O'Neill & Partners, told Reuters that the general perception is that Macerich will not accept the revised offer as they have a history of being “very independent and marching to their own beat”.
About the companies
Simon Property Group is an Indianapolis-based real estate investment group, owning or partly owning over 325 commercial properties, predominantly consisting of malls and retail outlets, located around the globe. Macerich Co. is trailing Simon Property in the industry, based out of Santa Monica, California. Macerich owns and operates 51 malls in the United States, translating to 54 million square feet of real estate floor space. It operates in the lucrative states of Arizona, New York, Washington DC, Chicago and the Pacific Rim, among others.
Malls and markets
When The Wall Street Journal broke the story of the takeover bid on March 4, Macerich shares stood at $84. Its share value continued to climb until Friday, after news of backtracking and renegotiating broke, when shares fell 4.3% to finish $89.53. Meanwhile, Simon Property’s share prices climbed by around 3% to trade at $195.10 in the early afternoon trading session last Friday. Market watchers are convinced that Simon Property will walk out on Macerich, if it rejects or attempts to renegotiate this new deal. Pointing at the April 1 deadline, analysts say that buyers looking to take over a business entirely do not place such a short term deadline. Investors have clearly gotten jittery about Macerich as is evident from the fall in share value. King She, an analyst with Susquehanna Financial Group predicts that Macerich will reject the offer over the next week and Simon Property will withdraw its bid.
