Indianapolis-based mall giant Simon Properties Group Inc. lobbed a $10 billion hostile takeover bid today against bankrupt rival Chicago-based General Growth Properties, according to the Wall Street Journal and others.
Some highlights of the bid and overall situation:
- GGP is currently in bankruptcy, buried under $7 billion in debt after years of easy credit fueled its massive expansion efforts during the last decade.
- Simon’s first takeover bid of GGP was more friendly and kept quiet. Simon chose to make the bid hostile and public after GGP reportedly ignored the bid.
- Simon isn’t the only one vying for GGP. Canadian-based Brookfield Asset Management has also been negotiating with GGP; however, with Brookfield’s infusion of capital GGP would still remain a separate company.
- Brookfield has already given $1 billion to GGP in order to alleviate debt, so it already has an internal voice in GGP’s decision making. If GGP chooses to accept Brookfield’s capital to settle the rest of its debt, it could emerge from bankruptcy as soon as next year.
- GGP could also quickly emerge from bankruptcy on its own, as they’ve already made agreements with their creditors to restructure loans and pledge their malls as collateral.
- The ultimate decision will not only be up to GGP’s board, but also GGP’s debtors and the bankruptcy judge.
- After all this news, GGP stock soared, and thus analysts expect a slightly sweetened bid by Simon. However, part of the stock inflation is due to the volatility of GGP on the pink sheets, where stocks are listed during bankruptcy.
- If the takeover occurs, the new Simon would own 560 malls, a third of the U.S. market.
- Even though they would own a third of the country’s malls, half of the top-ranking malls would be held by the new Simon after takeover. These malls are defined with sales of more than $400 per square-foot.
- Simon and GGP are currently the two largest and oldest mall owners in the country.
- Large-scale chain retailers like Gap and Limited Brands would be negatively impacted by a strengthened Simon, who would hold twice as much leverage over them as they negotiate locations while Simon tries to fill their malls.
What do we think about this? Yea/Nay? Leave some comments and let’s get a discussion started.