Simon Property Group Inc, the largest US shopping mall owner, made a US$10 billion hostile bid on Tuesday to acquire ailing rival General Growth Properties.
The acquisition would allow General Growth, the No. 2 owner of shopping centers, to emerge from bankruptcy protection. General Growth filed for bankruptcy last year after buckling under the weight of billions in debt it racked up during a massive expansion effort fueled by cheap credit.
The move is Simon’s second attempt at a major acquisition in three months. In December, Simon offered US$700 million in cash and stock to buy more than 60 outlet shopping centers from another competitor, Prime Outlets Acquisition Co. The deal is pending.
Simon is using its comfortable cash cushion and credit lines to take advantage of falling commercial property values, which are off 40 percent from their peak in 2007. And General Growth has some prized centers, including the Glendale Galleria in Southern California and the South Street Seaport in Manhattan.
PROPERTIES
Simon has been able to weather the economic downturn despite rising retail vacancy rates in the double-digits in some cities. The Indianapolis, Indiana-based company popularized the so-called lifestyle center mall design that turned malls into neighborhood-like communities. Simon owns more than 380 properties, including the Houston Galleria and the Fashion Valley Mall in San Diego.
Many national retail companies have stores in regional malls like those that Simon and General Growth own. If Simon or another large mall operator were to acquire General Growth’s centers, that could give it more muscle to negotiate for higher rental rates with retailers.
Under the terms of the offer, General Growth’s unsecured creditors would get US$7 billion, which would pay them in full.
Shareholders would receive US$3 billion, or US$6 a share in cash and US$3 a share in other assets. The offer, however, might be amended so shareholders could receive Simon stock instead of cash.
“Simon’s offer provides the best possible outcome for all General Growth stakeholders,” David Simon, chairman and CEO, said in a statement.
FORMAL OFFER
Simon disclosed its offer after General Growth’s board failed to respond to a formal offer it made last week.
In a letter to General Growth’s board dated on Feb. 8, Simon spelled out its offer and argued shareholders stand to gain more from a takeover than if General Growth emerged from bankruptcy as a standalone company, or accepted a rival bid.
“We are convinced that a transaction with Simon is superior to any proposal you may be considering,” Simon wrote in the letter, adding the proposal was not open-ended.
A spokesman for Chicago-based General Growth had no immediate comment.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS