Under the new terms of the deal, Simon will essentially acquire Taubman, paying $43 per share for an 80% stake in its fellow retail real estate investment trust (REIT). That price is the most notable term of the modified deal, as it's down from the originally agreed $52.50.
Since it was originally announced in February, the merger has assumed the dimensions of a soap opera. With the coronavirus pandemic and its devastating effect on the retail sector, Simon tried to back out of the deal entirely. In return, Taubman sued its would-be acquirer to prevent this. That lawsuit has been settled, both companies said.
A rapid decline in fortunes could be a major reason why the two REITs again found common ground. In its most recently reported quarter, Taubman suffered a 16% year-over-year decline in its total revenue, while its adjusted funds from operations (FFO, considered the most important profitability line item for REITs) fell a steeper 29%.
Simon's recent declines are even sharper. In its latest published quarter, the company's top line eroded by 25%, and FFO decreased by 33%.
Investors in both companies breathed a collective sigh of relief that the merger saga appears to be heading to a conclusion. Taubman's stock rose by 8.4% on Monday, while Simon's added 5.7% on the day.