Please ensure Javascript is enabled for purposes of website accessibility

Here’s Why Taubman Centers Stock Is Up More Than 50% Today

By Matthew Frankel, CFP® - Updated Feb 10, 2020 at 1:16PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The mall operator won't be an independent company for much longer.

What happened

Mall real estate investment trust Taubman Centers (TCO) is soaring on Monday. As of noon EST, the company's stock price had risen by more than 50%. And that's on top of a 10% upward move last week.

The reason? Taubman, which owns 24 malls in the U.S. and Asia, is being acquired by a larger mall operator, and they are paying a major premium.

Person holding shopping bags, walking toward a mall entrance.

Image source: Getty Images.

So what

Massive mall REIT Simon Property Group (SPG 3.12%), one of the largest real estate investment trusts in the world, is acquiring 80% of Taubman. The Taubman family will retail 20% ownership, and the existing management structure of Taubman will remain in place.

Simon is paying $52.50 in cash for each share of Taubman's stock, about 51% more than the closing price the day before the announcement.

The deal is expected to close in mid-2020, and Simon claims it will provide an immediate boost to funds from operations (the REIT version of earnings).

Now what

To put it mildly, the premium of more than 50% above Taubman's previous stock price seems like a hefty price to pay.

Having said that, Simon Property Group is in the best financial position to maximize the value of any retail real estate assets, and Taubman's properties are some of the best mall assets in the business. Simon's general strategy is to add mixed-use elements to its properties, such as entertainment venues, hotels, apartments, and diverse dining options, in order to create destinations, as opposed to just malls.

If Simon can successfully add value to the portfolio and create synergies by integrating Taubman into its already massive organizational structure, this could end up being a smart strategic move in the long run.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Simon Property Group, Inc. Stock Quote
Simon Property Group, Inc.
$111.38 (3.12%) $3.37
Taubman Centers, Inc. Stock Quote
Taubman Centers, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.