Largest US mall owner Simon Property launches $16-bn bid for Macerich Co

Simon Property Group Inc, the largest mall owner in the US, has launched a $16-billion unsolicited bid for one of its biggest rivals, Macerich Co, as it sought to gain scale amid an oversupply of retail space and changing habits of US shoppers.

In a takeover move that would see the combined company acquire more clout in negotiating leases with store owners, Simon has offered $91 a share in cash and stock for Macerich.

The retail landscape in the US had been divided into two distinct categories - the prospering upscale malls and down-at-heel malls barely able to survive.

Thanks to some recent deals, the highest-quality malls had become concentrated in the hands of a few owners, typically real-estate investment trusts like Simon and Macerich, the third- largest mall owner in the US.

Simon's acquisition is aimed at getting it a bigger presence in Arizona and Southern California, where Macerich had a large concentration of properties.

Macerich owns 59 shopping centres, while Simon owned 190 properties, including two of the highest-selling malls in the country - Roosevelt Field mall on Long Island and Houston Galleria.

Real estate analyst Craig Silvers, president of Bricks & Mortar Capital told Los Angeles Times Simon wanted Macerich was because it had "a great collection of shopping centres, malls and outlet centres, predominantly in solid and growing markets".

Recent years had seen mall operators face challenges due to the sharp increase in online sales, the success of non-mall discounters such as Wal-Mart and Costco, and the loss of tenants through mergers or business reverses. Further, with incomes stagnating, footfall at mall retailers had declined.

Macerich itself had bought rivals over the years and still had substantial potential for growth, according to Silvers. It recently acquired full ownership of the Fashion Outlets of Chicago and was going to develop the Fashion Outlets of San Francisco at the former site of Candlestick Park.

According to Macerich chief executive Arthur Coppola traffic at his malls had declined "maybe 1%" in the previous year. However, the same period had seen total sales rise 3.5 per cent to 4 per cent.

"Maybe they had fewer trips, but they bought more when they came," Coppola said during an appearance on Bloomberg Television.