Simon Property Group, the largest shopping centre owner in the US, has reached a revised deal to buy rival Taubman Centers, ending the last big court battle among corporate buyers looking to exit a transaction struck before the coronavirus pandemic hit the country in March.
The companies announced the new terms on Sunday, just a day before they were set to meet in a Michigan court over Simon’s attempt to walk away from the transaction following the Covid-19 outbreak.
Under the agreement, Simon will pay $43 per share, a 9 per cent premium on Taubman’s current stock price but significantly below the $52.50 per share deal the two companies had agreed in February.
Simon filed a lawsuit in June arguing that Taubman’s business had deteriorated to the point where the company had the right to walk away. It also claimed Taubman had breached the terms of the deal by failing to adequately rein in costs and take further steps to limit the impact of the pandemic on the business.
It is the third transaction to reach a settlement after a number of corporate buyers tried to renege on deals that had been agreed before Covid-19 struck the US.
LVMH and Tiffany last month agreed that the French luxury group would buy the American jeweller at a roughly 3 per cent discount to the price that the two had agreed to last November. That settlement pre-empted a trial in Delaware over whether Tiffany has suffered a so-called ‘material adverse effect’ when its sales dropped amid the fallout of the pandemic.
Advent International and software company Forescout Technologies agreed to reduce a buyout price by 12 per cent in July. The compromise was similarly struck just before a trial was set to begin that would determine whether Forescout’s business had collapsed so badly that the private equity group could terminate its deal.
Taubman, which has properties in central locations with high-end tenants, was forced to close all of its US shopping centres because of the spread of Covid-19. In the June lawsuit, Simon argued Taubman was particularly vulnerable because its properties were located in densely populated areas and reliant on tourism.
Simon’s share price has almost halved since the beginning of the year after seeing a big drop in March. The property group has taken steps to protect its shopping centres by buying up brick and mortar retailers in crisis.
In August, Simon became part-owner of Brooks Brothers, the two centuries-old menswear retailer that was tipped into bankruptcy in July. More recently, the company partnered up with Brookfield Asset Management to buy US department store chain JCPenney out of bankruptcy for $1.75bn.
Simon recently said it had collected 85 per cent of third-quarter rents due.
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