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Taubman Centers "Ready, Willing and Able" to Merge With Simon Property Group After Shareholder Vote

By Eric Volkman – Jun 29, 2020 at 9:31AM

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But the REIT's counterparty no longer wants to do the deal.

Simon Property Group (SPG 0.28%) no longer wants to acquire a strong majority in fellow retail real estate investment trust (REIT) Taubman Centers (TCO), but the latter continues to push the deal. Taubman said that its shareholders overwhelmingly approved the merger agreement reached in February between the two companies.

Under the agreement, in an all-cash deal, Simon Property Group was to buy 80% of Taubman's common stock. The price was $52.50 per share, which at the time represented a 51% premium to Taubman's share price. All told, the deal was valued at $3.6 billion.

Blurry interior of a department store.

Image source: Getty Images.

But that was before the crushing economic effect of the coronavirus pandemic, particularly on the retail sector, which has had to cope with prolonged shutdowns in efforts to mitigate the effects of the outbreak.

Earlier this month, Simon announced it was effectively terminating the merger because of this. According to its reasoning, Taubman had suffered a "material adverse event" (i.e., the coronavirus) that breached the covenants in the merger agreement.

The two REITs are now in litigation over the agreement. They have been ordered by a judge in Michigan to enter mediation in July; should they fail to come to terms, a court proceeding will begin in November.

In its press release on the shareholder ratification, Taubman says it "stands ready, willing and able to close the Transactions with Simon on June 30, 2020." That date is in accordance with the timeline stipulated in the agreement, Taubman said.

Investors seem to be guardedly optimistic that the feuding parties will come to some kind of settlement. On Friday, the shares of both rose on the day (Taubman by almost 0.4% and Simon by 1.1%), in contrast to the notable decline of the broader stock market.

Eric Volkman 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.

Stocks Mentioned

Simon Property Group Stock Quote
Simon Property Group
SPG
$119.34 (0.28%) $0.33
Taubman Centers Stock Quote
Taubman Centers
TCO

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

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