Simon Makes $10B Bid for GGP

February 16, 2010
By Allison Landa, News Editor

Courtesy Flickr Creative Commons user Yuki_KG

As troubled shopping-mall REIT General Growth Properties struggles to regain its footing after bankruptcy reorganization, a possible buyer has emerged in the form of fellow mall owner Simon Property Group.

Simon announced on Monday that it has made a $10 billion fully financed offer that includes $9 billion in cash. The offer would eliminate $7 billion in creditor debt, with General Growth shareholders receiving in excess of $9 per GGP share. That amount consists of $6 per share in cash as well as a distribution of GGP ownership valued at more than $3 per share, according to a statement.

General Growth filed for bankruptcy in April 2009 in an attempt to restructure $27 billion of debt. The nation’s second largest mall owner with more than 200 properties in 44 states, the company filed Chapter 11 bankruptcy after it failed to refinance the debt.

Simon’s bid is not entirely unexpected. In November, the company hired an investment adviser and law firm to explore the possibility of making a play for GGP.

In a letter to GGP’s board of directors, Simon chairman and CEO David Simon said that the company chose to make its offer public upon failing to receive an answer to its bid.

“We have not received a substantive response to this offer from GGP or its advisors, nor any indication that you are prepared to enter into serious discussions so as to make our offer available to your shareholders and creditors,” Simon wrote.

“We urge you to instruct your management and financial and legal advisors to immediately engage seriously with us, so that GGP and its creditors and shareholders can obtain the benefit of our proposed transaction – which provides for full and fair payment to all constituencies, is not subject to an extended period of market risk or other unforeseeable contingencies, and does not entail dilution of GGP’s existing equity interests – and GGP can achieve a prompt and successful conclusion to its reorganization proceedings.”