Please ensure Javascript is enabled for purposes of website accessibility

Simon Property Group Drops Acquisition of Taubman Centers

By Rich Duprey – Jun 10, 2020 at 2:15PM

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 says its peer did little to protect itself during the pandemic.

Simon Property Group (SPG 0.70%) will no longer pursue its $3.6 billion acquisition of fellow mall operator Taubman Centers (TCO). It said the coronavirus pandemic had too great of an impact on Taubman, and that Taubman failed to take the necessary steps to protect its business during the crisis.

Malls getting mauled

The acquisition was announced in February and Simon had said the deal would be at least 3% immediately accretive to its funds from operations per share on an annualized basis.

Woman wearing mask in a mall

Image source: Getty Images.

Taubman operates several malls in Asia, which were impacted by the COVID-19 outbreak before it was declared a pandemic. Like Simon, which operates top-tier Class A malls, Taubman's super-regional malls are also seen as upscale venues.

However, the spread of the coronavirus in the United States led to all retail outlets being shut down. Although Taubman warned tenants they were still required to pay their rent, many went on a rent strike. Simon has been forced to sue Gap for failing to pay its rent.

In announcing the merger termination, Simon said it asked the courts to say Taubman suffered a "material adverse event" that caused it to breach its covenants in the agreement. It says the pandemic had "a uniquely material and disproportionate effect" on Taubman compared with other mall operators, but more importantly, Taubman "failed to take steps to mitigate the impact of the pandemic," including not cutting operating or capital expenditures.

Simons says the merger agreement gives it the right to cancel the acquisition if the impact of the pandemic disproportionately fell on Taubman.

Simon's stock fell 4% in midday trading while Taubman's stock plunged 20%.

 

Rich Duprey 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.
SPG
$89.75 (0.70%) $0.62
The Gap, Inc. Stock Quote
The Gap, Inc.
GPS
$8.21 (-2.15%) $0.18
Taubman Centers, Inc. Stock Quote
Taubman Centers, Inc.
TCO

*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
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

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.