IBJNews

General Growth hearing delayed as Simon makes new bid

Back to TopCommentsE-mailPrintBookmark and Share

General Growth Properties Inc., the bankrupt U.S. mall owner, delayed a hearing on its bidding process for a third time after receiving a new takeover bid from rival Simon Property Group Inc.

General Growth said the hearing before U.S. Bankruptcy Judge Allan Gropper has been moved from Wednesday to Friday. The hearing had already been pushed back twice from its original date of April 29. The Chicago-based company said Monday it would back a financing plan led by Brookfield Asset Management Inc., a day after getting the new buyout proposal from Simon.

Simon, the largest U.S. mall owner, offered about $5.8 billion in stock and cash to buy General Growth and said it would pay down about $7 billion of unsecured debt, a person with knowledge of the bid said. The offer is the company’s third attempt to buy or gain a piece of its biggest rival. A $10 billion buyout bid was spurned in February, and General Growth said Monday it will support a revised plan by Brookfield in court over a similar one proposed by Simon last month.

“It’s been pretty clear that Brookfield wants to win this thing, and for Simon it’s not an everyday occurrence to get a portfolio the size and scale of General Growth,” Alexander Goldfarb, an analyst with Sandler O’Neill & Partners LP in New York, said in an interview. “It comes down to the judge’s decision.”

Blackstone Group LP, the world’s largest private equity firm, is participating in Simon’s General Growth bid, a person with knowledge of the discussions said. Blackstone would contribute more than $1 billion to the plan, which may include forming a joint venture for as many as 40 of General Growth’s properties, said the person, who asked not to be named because the talks are private.

Christine Anderson, a spokeswoman for New York-based Blackstone, declined to comment.

Simon won’t make any more proposals should its latest one be turned down or if the court approves Brookfield’s plan, which includes issuing warrants that make a takeover more costly, the person familiar with the Indianapolis-based company’s bid said.

Glenn Tongue, managing partner of General Growth investor T2 Partners LLC, said he doesn’t believe Simon’s latest offer, valued at $18.25 a share, will be its last. General Growth is worth “well into the $20s” on a per-share basis, and Simon may make a new bid before the May 7 hearing, Tongue said Tuesday in an interview at an investment conference Pasadena, California.

“They are nowhere near their final, best offer as far as I’m concerned,” Tongue said. “This is an M&A mating dance and, frankly, it’s been playing out the way you expect it to with two very professional deal-doers. There’s a lot of to and fro.”

T2 Partners will remain a General Growth investor even if the company stays independent with investments from the Brookfield-led group, Tongue said. T2, based in New York, owns about 2 million General Growth shares, and has bought about 100,000 since mid-April, he said.

The revised proposal by Brookfield and its partners, Fairholme Capital Management LLC and Pershing Square Capital Management LP, has “significantly enhanced terms” over the group’s original investment agreement, General Growth said in court documents filed in Manhattan yesterday.

Goldfarb of Sandler O’Neill and Benjamin Yang of Keefe, Bruyette & Woods Inc. in San Francisco said it’s likely that U.S. Bankruptcy Judge Allan Gropper will approve the Brookfield- led plan.

“So far, the judge has given GGP leeway in plotting its exit strategy,” Yang wrote late Monday in a note to investors. “Given how much progress GGP’s management and board have made since filing for bankruptcy a year ago, including stirring up interest in the company from multiple bidders, we believe the judge will be more likely to follow the board’s recommendation.”

Bruce Berkowitz, founder of Miami-based Fairholme, said his investment plan deserves court approval. At the same time, Simon still may make an improved bid for General Growth, he said.

“Is there a higher price that can win? Of course there is,” Berkowitz said in an interview at the conference in Pasadena. “Right now we’re at sort of the depths of the real estate recession. At least with our proposal, everybody lives to fight another day.”

The latest Brookfield proposal has as much as $7 billion in equity commitments—$500 million more than the prior one—and includes an optional backstop for $1.5 billion in debt financing if the company asks for it, according to court documents.

Under the new plan, Toronto-based Brookfield and its partners would get 40 percent of 120 million stock warrants they’re seeking once their proposal is approved by the court. They would receive 20 percent more on July 12, and the remainder over the course of their commitment to General Growth.

Staggering the warrants would lower the extra price another bidder, such as Simon, would have to pay should it make an offer for the company. Simon’s competing investment plan, submitted last month, eliminates the warrants.

“General Growth has concluded that accepting a minority investment from Simon Property Group—even one without the warrants—would likely deter other parties from putting together a competing proposal and overall create a one-horse race,” lawyers for General Growth wrote in the filing. The company is reviewing the newest Simon takeover, received May 2, according to the filing.

Under Simon’s new offer, the company would pay $13.25 a share for the new General Growth Properties—$10 in Simon stock and $3.25 in cash—and would back-stop the $5-a-share offering for a company to be spun off, General Growth Opportunities, said the person familiar with the plan.

Simon also would pay down about $7 billion in unsecured General Growth debt and assume more than $20 billion of mortgages, the person said.

Les Morris, a spokesman for Simon, said he had no comment.

General Growth won’t be able to go to court “without having some response to Simon’s topping offer,” said David Fick, an analyst with Stifel Nicolaus & Co. in Baltimore. He expects Simon to ultimately succeed in purchasing its rival.

“It doesn’t make sense as a standalone,” he said of General Growth.

General Growth filed the largest real estate bankruptcy in U.S. history in April 2009 after amassing $27 billion in debt making acquisitions. Its properties include New York’s South Street Seaport, Boston’s Faneuil Hall and the Grand Canal Shoppes and Fashion Show in Las Vegas.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Uh, sorry Johnnie, but you are incorrect. Despite the assertions by yourself and various defenders and captains, sports attendance is NOT off significantly at most sporting events in the US. Variances in attendance has been in the range of single digits, both + & - for years now. MLB has had most of its best overall attendance nubers in the last decade, and that trend has been consistent for most major sporting events. The number one issue cited by most fans when asked about attendance is the overall cost of attending. The presence of HD and big screen televisions in home doesn't even register, as a factor for not attending an event. VALUE in the product is the key, and apparently is something lacking in the current ICS. What other explanation is there when with what is routinely touted as the "best" racing on the planet, fans are staying away in DROVES. A "close" title battle into the last event at Fontana, with the "cars and stars" of the ICS, and who showed up? MAYBE 8K. Sorry, but HD TV isn't to blame for that kind of fan apathy.

  2. Do you need finance to establish your business ? Are you interested in getting a loan at 3% from our private company? If so please Email: suntrust_oil@blumail.org

  3. If she was worth the $ the public outcry over direct tv dropping them would have kept them on their dishes as we have seen with other companies. I too quit watching channel 13 after she showed up since I left channel 8 because of her all show rather than production results. When Randy on 8 corrected her she had a big head and incorrectly challenged his correction for pronunciation of a city. Other antics while she matures was too much for me with her very inaccurate forecasts. All the forecasters were predicting rain until Thursday except Chris. They predicted sunny on Thursday but instead of rain until Thursday upon which the sun would finally make it out in full glory Chris was right on the money just as I too predicted looking at the radar on weather.gov. One thing I love about Angela is the fear you can see in her every time it thunders in the winter. It far exceeds the entertainment value of her body language (high heel noise drags, depression, etc) when her forecasts are so incorrect. Her hair stands on end, you have to see it!!!

  4. Good Day, Apply For A Loan I am Mr Fernadez Antonio, a private Loan lender and a cooperate financial for real estate and any kinds of business financing. I also offer Loans to individuals, Firms and cooperate bodies at 3% interest rate We offer any kind of loans. email us via fernadezloaninvest@outlook.com LOAN APPLICATION FORM First name:......................... Middle name:......................... Last name:........................................ Date of birth (yyyy-mm-dd):....................... Gender:........................................... Marital status:................................... Total Amount Needed............................... Loan Duration.................................... Address:.......................................... City:............................................. State/province:................................... Zip/postal code:.................................. Country:.......................................... Phone:............................................ Fax:.............................................. Mobile/cellular:.................................. Monthly Income.................................... Occupation:....................................... Best Regard, Mr Fernadez Antonio.

  5. i will love to share my testimony to you all the people in world i got married to my husband about 2 year ago we start having problems at home like we stop sleeping on the same bed,fighting about little things he always comes home late at night,drinking too much and sleeping with other women out side i have never love any man in my life except him. he is the father of my child and i don't want to loose him because we have worked so hard together to become what we are and have today .few month ago he now decided to live me and the kid,being a single mother can be hard sometimes and so i have nobody to turn to and i was heart broken.i called my mom and explain every thing to her,my mother told me about DR.okoro how he helped her solve the problem between her and my dad i was surprise about it because they have been without each other for three and a half years and it was like a miracle how they came back to each other. i was directed to DR. okoro on his email:okorospell@gmail.com and explain everything to him,so he promise me not to worry that he will cast a spell and make things come back to how we where so much in love again and that it was another female spirit that was controlling my husband he told me that my problem will be solved within two days if i believe i said OK So he cast a spell for me and after two days my love came back asking me to forgive him i Am so happy now. so that why i decided to share my experience with every body that have such problem contact Dr okoro the great spell caster on his email addresses spellcasterforlove@outlook.com

ADVERTISEMENT