Indianapolis-based Simon Property Group Inc. (NYSE: SPG) is proposing to acquire one of its biggest competitors for more than $22 billion. The retail real estate company is urging California-based The Macerich Co. (NYSE: MAC) Chief Executive Office Art Coppola to abandon “entrenching defensive tactics” and begin discussions on a deal. CEO David Simon says Macerich has rejected multiple meetings about an attempted acquisition.
March 9, 2015
INDIANAPOLIS, Ind. – Simon Property Group, Inc. (NYSE: SPG) today announced that it has sent a letter to The Macerich Company (NYSE: MAC) confirming its prior discussions regarding Simon's proposal to acquire all of the outstanding stock of Macerich for $91.00 per share in cash and Simon shares. The total value of the proposed transaction is approximately $22.4 billion, including the assumption of Macerich's approximately $6.4 billion of debt outstanding (inclusive of its pro rata share of mortgage debt from unconsolidated entities). Macerich shareholders would receive consideration in the form of 50% cash and 50% Simon common stock, utilizing a fixed exchange ratio.
The offer represents a 30% premium to Macerich's unaffected closing stock price of $69.88 on November 18, 2014, the day before Simon disclosed its 3.6% investment in Macerich (equivalent to 5.71 million shares). The offer is also $20.00 above, or a 28% premium to, the $71.00 share price underlying the agreement by Macerich's Board of Directors to issue 10.9% of Macerich's shares to Ontario Teachers' Pension Plan in exchange for certain joint venture interests in November 2014. To facilitate that transaction Macerich waived its excess share provision, which restricts share ownership of greater than 5%.
Simon also has reached an agreement in principle to sell selected Macerich assets to General Growth Properties, Inc. (NYSE: GGP) in connection with the closing of the acquisition. Neither transaction financing nor the sale of assets to General Growth will be a condition to closing the proposed transaction.
David Simon, Simon's Chairman and Chief Executive Officer, said, “We believe Simon's cash and stock offer would bring compelling value to shareholders of both companies. Macerich shareholders would receive a significant current cash premium as well as the long-term upside potential of an investment in Simon, which is widely recognized for its high-quality portfolio and industry-leading operating performance. Simon has consistently delivered outstanding returns to its shareholders and for a decade has outperformed Macerich in virtually every key operating and financial category, including share price performance, comparable NOI growth, sales per square foot, occupancy rates, FFO growth, dividend growth and total shareholder returns. We are confident our proposed transaction provides a highly attractive value proposition to Macerich shareholders.”
Mr. Simon continued, “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. 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. We expect the transaction to be immediately accretive to FFO, and that we can improve the operations of these assets. Furthermore, we are pleased to have reached an agreement in principle with GGP on the sale of selected properties.”
Mr. Simon concluded, “Notwithstanding multiple attempts, including meetings in December 2014 and February 2015 following the disclosure of our investment in November 2014, Macerich has thus far refused to engage in discussions with us regarding the merits of an acquisition by Simon. Considering the substantial benefits our offer provides, we are confident that, given the opportunity, Macerich's shareholders would accept our proposal. 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. It is our strong preference to work with Macerich to reach a mutually beneficial agreement, and we are available immediately to meet with Macerich and its advisors.”
Simon's Board of Directors has unanimously endorsed the proposal. Simon is prepared to devote the resources necessary to move expeditiously to negotiate and execute a definitive agreement. There is no financing condition to the proposal and Simon believes there is no legal or other impediment to completing the proposed transaction.
BofA Merrill Lynch is acting as financial advisor to Simon and Latham & Watkins, LLP is acting as legal counsel to Simon in connection with the proposed transaction.
The full text of Mr. Simon's March 9, 2015 letter to Macerich is below.
March 9, 2015
Mr. Arthur M. Coppola
Chairman & Chief Executive Officer
The Macerich Company
401 Wilshire Boulevard, Suite 700
Santa Monica, CA 90401
It has now been well over a week since we met to discuss Simon's interest in acquiring Macerich, and I am disappointed you have not gotten back to me as you said you would. I am therefore providing you with a written proposal confirming the basis on which Simon proposes to acquire Macerich. As discussed, this transaction has strong strategic logic and would bring substantial value to our respective shareholders. The key terms of our offer are as follows:
A purchase price of $91.00 per share for 100% of Macerich's outstanding common equity. This represents a 30% premium to the Macerich closing share price of $69.88 on November 18, 2014, the last trading day prior to the disclosure of our 3.6% ownership stake in Macerich which we continue to own. Our purchase price is also $20.00 per share, or 28%, higher than the price at which Macerich sold a 10.9% ownership stake to Ontario Teachers' Pension Plan in November 2014.
Our purchase price would be paid to Macerich stockholders 50% in cash and 50% in Simon common stock utilizing a fixed exchange ratio. With your cooperation, we would endeavor to structure the acquisition of Macerich in a manner that would preserve tax deferral for the limited partners of the Macerich operating partnership.
We also have reached an agreement in principle to sell selected Macerich assets to General Growth Properties, Inc. in connection with the closing of our acquisition. Neither transaction financing nor the sale of assets to General Growth will be a condition to our closing.
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 which have delivered industry-leading returns for more than two decades.
We have completed nearly $40 billion of acquisitions in a variety of complex transactions during our 21 years as a public company and we see no legal or other impediment to completing our purchase of Macerich.
All of the necessary resources are available to us to promptly negotiate and execute definitive agreements. I suggest we arrange for a call to discuss next steps.
Very truly yours,
Chairman and Chief Executive Officer
Simon is a global leader in retail real estate ownership, management and development and a S&P100 company (Simon Property Group, NYSE: SPG). Our industry-leading retail properties and investments across North America, Europe and Asia provide shopping experiences for millions of consumers every day and generate billions in annual retail sales. For more information, visit simon.com.
Source: Simon Property Group Inc.