Simon Property Group (NYSE:SPG) still believes in malls.

The owner of upscale shopping centers has agreed to buy 80% of Taubman Centers (NYSE:TCO). Simon will buy all of the common shares available at $52.50 per share in cash while the Taubman family will sell about one-third of its ownership interest, remaining a 20% partner in the Taubman brand (but won't have any equity in Simon).

In the deal worth $3.6 billion, Simon will be paying a just-over 50% premium on where the stock closed on Friday.

A woman in a mall holds a phone and shopping bags.

Upscale and higher-end malls have done better than lower-end ones. Image source: Getty Images.

What is Simon getting?

Taubman owns "24 high-quality retail assets (including 21 in the United States and 3 in Asia), consisting of approximately 25 million feet of gross leasable area," according to a press release. The current Taubman management team will remain in place.

"By joining together, we will enhance the ability of TRG [Taubman] to invest in innovative retail environments that create exciting shopping and entertainment experiences for consumers, immersive opportunities for retailers, and substantial new job prospects for local communities," said Simon CEO Davi Simon in the press release.

Why is Simon doing this?

While lower-tier malls and shopping centers have struggled, Simon's higher-end malls have been able to adapt to changes in consumer discretionary spending. It has found a formula to evolve its malls adding events, gyms, co-working spaces, and even hotels to enhance its properties.

Being bigger should only enhance the company and give it more leverage with prospective tenants. Two like companies coming together should make a stronger whole (albeit at a steep premium on the stock price).