Simon Property ends pursuit of smaller rival Macerich Co

US shopping mall operator Simon Property Group Inc yesterday ended its quest to buy Macerich Co, after its smaller quarry rejected a sweetened buyout offer of $23.2 billion, including debt.

Simon had launched a $16-billion bid last month raising within a fortnight from $91 per share or $16 billion to $95.50 amounting to $16.8 billion, valuing the deal at about $23.2 billion, including assumption of Macerich's $6.4-billion debt. (See: Simon Property raises bid for rival Macerich to $16.8 bn).

Macerich said that it reviewed the revised proposal with the assistance of its financial, real estate and legal advisors, and determined that the proposal continues to substantially undervalue the company and that pursuing the proposed transaction at this time is not in the best interests of the company and its shareholders.

Macerich, whose assets include Tysons Corner Center in Virginia, Fashion Outlets of Niagara Falls in New York, Biltmore Fashion Park and Scottsdale Fashion Square in Arizona and Santa Monica Place in Southern California, had also adopted the rights plan or so-called ''poison pill'' by issuing new shares to shareholders, a move designed to make it very expensive for Simon to succeed with its hostile offer.

Simon's proposed acquisition wa aimed at getting 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 that 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.

Simon has been on an acquisition spree; in December 2009 it acquired Prime Outlets Acquisition Company (Simon Property to acquire Prime Outlets for $2.33 billion) and three months later in February 2010, it went hostile with a $10-billion bid for the second largest US mall owner, General Growth Properties, which had filed for bankruptcy  (Simon Property makes hostile $10-billion offer for General Growth Properties).

In December the same year, it arranged £3-billion funding to take over UK realty firm Capital Shopping Centres Plc (CSC), in its efforts to block CSC's plan to buy Manchester's Trafford Centre (Simon Property secures £3 bn to fund CSC acquisition ).