Regulators take interest in Simon’s play for Prime Outlets

Gap Inc. was contacted by the Federal Trade Commission about Simon Property Group Inc.'s proposed acquisition of Prime
Outlets Acquisition Co.

“We are aware of the FTC’s inquiry into the proposed Simon acquisition of Prime Outlets and we are responding
to its inquiries,” Louise Callagy, a spokeswoman for the San Francisco-based clothing retailer, said in a telephone
interview Friday. Gap has stores at outlets owned by both Simon and Prime.

Indianapolis-based Simon agreed in December to buy Prime Outlets from Lightstone Group for $2.33 billion including debt.
The deal would give the largest U.S. mall owner an additional 22 retail outlet centers, increasing its total to more than
60. Simon also is trying to buy bankrupt General Growth Properties Inc., its biggest rival. General Growth rejected Simon’s
unsolicited bid Feb. 16, saying the $10 billion offer was too low.

Simon’s bid to buy Chicago-based General Growth out of Chapter 11 bankruptcy may also face regulatory hurdles, David
Fick, an analyst with Stifel Nicolaus & Co. in Baltimore, said in a telephone interview.

“If there are issues with tenants on the smaller deal, there’s potentially a bigger issue with tenants on a bigger
deal,” Fick said.

Simon Property Chairman and CEO David Simon and spokesman Les Morris didn’t respond to telephone calls seeking comment.
Cecelia Prewett, an FTC spokeswoman, also didn’t respond to messages.

David Keating, a spokesman for General Growth, declined to comment.

Robert Pitofsky, a law professor at Georgetown University and a former chairman of the Federal Trade Commission, said the
agency often calls competitors and other relevant parties before deciding whether to launch a formal investigation.

“This is a very common approach to horizontal or vertical mergers,” he said. “You have to know a lot more
about the facts before you fire off some kind of formal investigation.”

General Growth this week announced an agreement to split itself into two companies as part of an effort to exit bankruptcy
with a $2.63 billion investment from Brookfield Asset Management Inc. Other bids may still be made, General Growth President
Thomas H. Nolan Jr. said on Feb. 24.

Simon subsequently signed a confidentiality agreement allowing it to review General Growth’s finances as it considers
the potential acquisition, according to a person familiar with the pact.

“The bare facts that are known today suggest that the transaction will at least get a once-over, either by the Department
of Justice or the FTC, simply because you’re combining No. 1 with No. 2,” said Brian Weinberger, an antitrust
attorney with Buchalter Nemer in Scottsdale, Ariz.

“If nothing else, the competitors of Simon and General Growth will look at those issues and consider whether to object,”
he said.

David Simon has dismissed concerns about the FTC blocking a purchase of General Growth. Simon isn’t at risk of having
too large a market share or a monopoly in any market, he said in a Feb. 5 conference call with analysts and investors.

“We certainly would argue strenuously that neither of those occur with or without GGP or anybody else,” he said.
“There’s a lot of retail real estate out there. And it’s very diverse, and retailers go in and out of product
all the time. And I don’t think you can look at one particular segment or one particular market.”

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