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Simon weighs new General Growth bid, sources say

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Simon Property Group Inc. is considering raising its $10 billion buyout offer for rival shopping mall owner General Growth Properties Inc. as early as this week, two people familiar with the matter said Tuesday.

Indianapolis-based Simon sent a letter to General Growth this week saying it anticipates boosting its offer above that of a proposal put forth by General Growth and three of its largest stakeholders, the people said on condition of anonymity because they were not authorized to discuss the matter publicly.

That means a new Simon offer would have to value General Growth above $15 a share. Simon's initial offer valued the Chicago-based company at about $9 a share.

General Growth, the nation's second-largest shopping mall operator, sought shelter from creditors last April. It was the largest real estate bankruptcy in U.S. history.

Despite being in Chapter 11 bankruptcy protection for nearly a year, it finds itself in the unusual position of courting buyout offers that promise to pay off creditors in full and give shareholders a premium for their stock.

Simon went public last month with its bid for General Growth, but it was rebuffed.

General Growth is looking for a higher offer and has put forward a plan to exit bankruptcy with an investment from Canadian property manager Brookfield Asset Management Inc., Fairholme Capital Management, one of its largest unsecured creditors, and Pershing Square Capital Management, one of its largest shareholders.

General Growth is expected to seek approval from the bankruptcy court in coming weeks to designate the Brookfield-Fairholme-Pershing proposal as a "stalking-horse" bidder as it solicits other buyout offers. A stalking-horse bid is an initial offer for a bankrupt company's assets.

General Growth also plans to ask the court to approve so-called bid protections that would compensate the investor group should General Growth sell the company to another bidder. The company has previously outlined compensating the stalking-horse bidder with warrants to buy 60 million shares of General Growth at an exercise price of $15 a share.

U.S. Bankruptcy Judge Allan Gropper in New York has tentatively set April 13 to hear the request.

In its letter this week, Simon noted that it will likely not participate in the bidding process beyond that date, should the court approve bid protections and effectively raise the costs to acquire General Growth, the people said.

A Simon spokesman declined to comment Monday.

General Growth spokesman David Keating declined to comment beyond a general company statement: "Our goal is to maximize value for all stakeholders and we have developed a sound process to enable us to achieve that goal."

General Growth shares rose 35 cents, to $15.10each, on Tuesday. Shares in Simon Property rose $2.30, to $84.18.

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  1. How can any company that has the cash and other assets be allowed to simply foreclose and not pay the debt? Simon, pay the debt and sell the property yourself. Don't just stiff the bank with the loan and require them to find a buyer.

  2. If you only knew....

  3. The proposal is structured in such a way that a private company (who has competitors in the marketplace) has struck a deal to get "financing" through utility ratepayers via IPL. Competitors to BlueIndy are at disadvantage now. The story isn't "how green can we be" but how creative "financing" through captive ratepayers benefits a company whose proposal should sink or float in the competitive marketplace without customer funding. If it was a great idea there would be financing available. IBJ needs to be doing a story on the utility ratemaking piece of this (which is pretty complicated) but instead it suggests that folks are whining about paying for being green.

  4. The facts contained in your post make your position so much more credible than those based on sheer emotion. Thanks for enlightening us.

  5. Please consider a couple of economic realities: First, retail is more consolidated now than it was when malls like this were built. There used to be many department stores. Now, in essence, there is one--Macy's. Right off, you've eliminated the need for multiple anchor stores in malls. And in-line retailers have consolidated or folded or have stopped building new stores because so much of their business is now online. The Limited, for example, Next, malls are closing all over the country, even some of the former gems are now derelict.Times change. And finally, as the income level of any particular area declines, so do the retail offerings. Sad, but true.

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