Mall operator rejects unsolicited takeover bid
One of the major mall operators in the United States, Macerich, rejected an unsolicited offer from its largest rival, Simon Property Group, and took steps to defend itself against a hostile takeover.
Simon announced on March 9 that it had offered $91 a share in stock and cash after it had been privately put off by Macerich. The offer valued Macerich at about $22.4 billion, including the assumption of some $6.4 billion of Macerich’s debt.
After more than a week of consideration by Macerich’s board, the company’s chief executive, Arthur M. Coppola, said in a statement that “Simon Property Group’s unsolicited proposal significantly undervalues Macerich and fails to reflect the full value of our portfolio of unique and irreplaceable assets and our positive growth prospects.”
Macerich also announced a series of governance changes that would make it all but impossible for Simon to pursue a hostile takeover.
Macerich, which is incorporated in Maryland but run out of California, said it was adopting a shareholder rights plan, or poison pill, that would expire at the company’s annual meeting in 2016.
It also said that it was adopting a classified structure for its board: Directors would be assigned to one of three classes, each serving three-year terms. That would prevent Simon from waging a quick proxy fight to replace the Macerich board.
Investors expressed their disapproval by selling Macerich shares, sending the stock’s price down more than 3 percent Tuesday.
The rejection of the Simon bid, which was expected, puts the ball squarely back in Simon’s court.
Simon could still increase its bid, hoping to sway the Macerich board. But with the new defenses in place, both Simon and Macerich shareholders will have little recourse if the Macerich board does not want to sell.
David Simon, Simon’s chairman and chief executive, said in a statement that the Macerich board’s action had prevented shareholders “from having a voice in matters critical to the value of their investment.” He added, “It is truly disappointing Macerich would not even meet to discuss our proposal and remarkable that its view on value could have changed so drastically just four months after issuing 10.9 percent of its shares at the $71 level.”
In Macerich, Simon sees one of the last bright spots in a changing retail landscape.
Foot traffic and sales are falling at many malls across the country, but shopping centers geared toward wealthier shoppers have defied that trend and are thriving.
Simon, based in Indianapolis, is the largest operator of high-end, or Class A malls. Macerich has a similarly highend portfolio, with most of its properties in the West.
As part of its plan, Simon said last week that it had separately struck a deal to sell some Macerich assets to General Growth Properties, the No. 2 mall operator, in an effort to ease antitrust concerns.
But Macerich said Tuesday that this move was “stock- holder-unfriendly and raises questions of legality.” By enlisting the help of General Growth, Simon essentially took one of the few other potential buyers for Macerich out of the running.
Advisors to Macerich have questioned whether this move might violate federal antitrust law.
In rejecting Simon’s offer, Macerich pointed to its own strategic plan and its focus on higher-quality malls.
Coppola said that sales per square foot at Macerich malls had risen to $587, from $517 two years ago. He added that the company had been selling off lower-quality properties to focus on Class A malls. In the coming five years, Coppola said Macerich would be spending $400 million to $500 million on new development and upgrades, investments that he said would “materially enhance stockholder value.”