Simon Property, Taubman agree to revise merger deal

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High-end mall developer Taubman Centers Inc. has agreed to accept a price cut in its takeover by Simon Property Group Inc., in a move that will allow the companies to avoid a drawn-out legal battle that was set to start Monday.

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The companies have agreed that Simon will pay $43 a share for Taubman under the new deal, they said Sunday. That is down from the original price of $52.50.

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The Wall Street Journal reported earlier Sunday that the companies had recut the deal.

The companies had first reached a deal in February, before the coronavirus pandemic and social distancing altered the outlook for bricks-and-mortar retailers.

The deal structure, which involves the Taubman family selling about one-third of its interest in Taubman and remaining a 20% owner in the operating subsidiary of its namesake firm, is unchanged.

The new deal amounts to a nearly 20% discount and savings of close to $800 million for Simon. In addition to the $9.50 a share discount, Taubman has also agreed not to declare or pay a common stock dividend before March 2021.

The two companies, which were set to face off in a Michigan court over the deal beginning this week, also agreed to settle the pending litigation.

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They said they expect the deal to close in late 2020 or early 2021.

The tie-up is one of a handful of deals to sour as a result of the pandemic, including some in the retail sector, though the size of the price cut is larger than what is typically seen. Tiffany & Co. last month agreed to a roughly 2.6% price cut from LVMH Moët Hennessy Louis Vuitton SE in what was originally a $16.2 billion deal.

Private-equity firm Sycamore Partners sued Victoria’s Secret parent L Brands Inc. in April, saying that the retailer had violated the terms of their merger agreement by closing stores, furloughing workers and skipping rent payments. L Brands countersued, and the two sides eventually agreed to scrap the deal.

Though retail and real estate have been among the sectors hardest hit by the pandemic, with fewer people spending time in stores or traveling, they could recover ground once a vaccine is widely available. In a sign that many investors are optimistic, shares of companies including Simon jumped early last week on news of successful vaccine test results.

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