Simon makes hostile bid to buy Macerich in deal worth $22B

Simon Property Group Inc., the largest U.S. mall owner, has offered to buy the Macerich Co. in a cash-and-stock transaction valued at about $22.4 billion, including debt, Simon announced Monday morning.

Macerich shareholders would receive the equivalent of $91 a share as 50 percent cash and 50 percent Simon stock under the deal, Indianapolis-based Simon said in a written statement. The transaction would include the assumption of about $6.4 billion of debt.

Sources said last week that Simon was interested in acquiring Macerich, the third-leading shopping mall owner when measured by market capitalization.

Simon’s hostile bid represents a 30-percent premium to Macerich’s closing price on Nov. 18, the day before Simon disclosed it acquired a 3.6-percent stake in the Santa Monica, California-based mall landlord. A purchase of Macerich, which has a high concentration of West Coast properties, would increase Simon’s reach in the United States.

Simon said it met with Macerich twice and has made multiple attempts to discuss its interest, and the company has so far refused to engage in talks.

“This is a very compelling offer that will enable Macerich stockholders to realize a substantial and immediate cash return while building long-term value through ownership of Simon shares,” Simon CEO David Simon said in a letter to Macerich Chairman and CEO Art Coppola, included in the statement.

"Considering the substantial benefits our offer provides, we are confident that, given the opportunity, Macerich's shareholders would accept our proposal," Simon added. "In fact, many of our overlapping shareholders have voiced enthusiastic support to us for a potential combination since we publicly announced our stake in Macerich. We urge Macerich to forego entrenching defensive tactics that obstruct the will of its shareholders and instead engage in serious discussions with us."

Simon Property also said it has reached an agreement to sell certain Macerich assets to Chicago-based General Growth Properties Inc., the No. 2 U.S. mall landlord, in connection with completion of the deal.

Simon has 190 properties and a market value of nearly $60 billion. Macerich, with a market value of about $13.7 billion prior to Monday, has a portfolio of 59 shopping centers concentrated in California and Arizona. It also has properties in Chicago, New York City and Washington, D.C.

Macerich shares rose 5.9 percent in early trading, to $91.80 each. The stock has gained 32 percent since Simon first disclosed its stake.

Simon shares rose 86 cents, or less than 1 percent, to $181.44.

Macerich said its board will review the proposal and, in the meantime, advised shareholders of the company to take no action.

Simon is likely to make a higher offer to win over Macerich, said David Auerbach, an institutional REIT trader at Esposito Securities LLC in Dallas.

“This is their first shot across the bow,” he said.

Takeovers of companies are one of the few ways large U.S. mall owners can grow because high-quality properties rarely come up for sale. Simon has been developing outlet malls around the world while refurbishing and expanding some of its biggest U.S. malls to boost growth.

Simon has also been active in transactions outside the U.S. In 2012, the company acquired an interest in European mall owner Klepierre, based in Paris.

The REIT hasn’t always been successful in trying to complete deals. It failed in an effort to take over General Growth after the second-largest mall owner filed for bankruptcy in 2009. General Growth exited bankruptcy in November 2010.

"Simon has a successful track record of integrating and optimizing acquisitions, having successfully orchestrated nearly $40 billion of corporate real estate M&A transactions in 21 years as a public company," Simon said. "Macerich's assets represent a strong strategic and geographic fit for Simon, and we believe this is an attractive opportunity to create long-term value for Simon shareholders."