Simon Property makes hostile $10-billion offer for General Growth Properties

Simon Property Group Inc. (Simon), the largest public real estate company and mall owner in the US, yesterday made a hostile $10 billion offer to bankrupt rival General Growth Properties Group Inc. (GGP).

In April 2009, Chicago-based GGP had along with 166 of its properties filed for the largest real estate bankruptcy in US history after reeling under $27.3 billion debt, after going on a massive expansion drive on cheap credit, before the onset of the financial market collapse.

Indianapolis, Indiana-based Simon, an S&P 500 company and owner of more than 300 malls in the US, said that it had made an offer on 8 February, but GGP's board or its advisors failed to make a "substantive response," and hence had to go public with its offer.

In a letter written by David Simon, chairman and CEO of Simon to the board of GGP yesterday, Simon will offer to repay $7 billion to GGP's unsecured creditors and approximately $3 billion to its shareholders.

Simon said that GGP shareholders would receive $6 a share in cash and $3 a share in other assets, and added that it was prepared to offer its own equity instead of cash for those shareholders or creditors who would prefer stock to cash.

GGP shareholders would receive more than $9.00 per GGP share, a 21.9 per cent discount to the company's trading price Tuesday, but news of the hostile bid sent GGP's stock up by 17.5 per cent to $11.03 yesterday.