Simon Property Group Inc. (SPG) offered to buy General Growth
Properties Inc. (GGWPQ) for about $10 billion, as the world's
largest shopping-mall operator seeks to absorb the No. 2 mall owner
in the U.S. while General Growth grapples with its exit from
bankruptcy court.
Although shopping-mall real estate investment trusts have been
struggling with declines in consumer spending, Simon is viewed as
one of the healthiest. Reporting better-than-expected profit for
the fourth quarter last month, Simon was still hurt by write-downs
and lower occupancy rates, but it predicted brighter days for
2010.
Meanwhile, Simon raised several billion dollars in the latter
part of 2009, looking for opportunities to take advantage of woes
in the commercial real-estate sector. Simon had said earlier this
month it wasn't in active negotiations with General Growth.
The Chicago-based owner of 200 U.S. malls filed for Chapter 11
bankruptcy protection in April, taking 166 of its malls with it.
Since then, it has restructured and extended the due dates of $11.6
billion in mortgages on its malls. But it needs still needs to
reach similar deals with holders of an additional $3 billion of
mortgages and to pay its $7 billion of unsecured debt with either
cash or equity.
Simon said Tuesday its proposed deal would accelerate General
Growth's emergence from bankruptcy court. The offer gives creditors
about $7 billion in considerations by providing a 100% cash
recovery of par value plus accrued interest divided among holders
of various debts and securities.
General Growth shareholders would receive more than $9 a share,
including $6 in cash plus assets valued at more than $3 a share. It
is also prepared to offer Simon common shares instead of cash to
General Growth holders interested in owning Simon stock.
Secured debt on General Growth's portfolio would remain in
place.
A General Growth spokesman wasn't immediately available to
comment.
Simon Property's stock closed Friday at $72 and wasn't active
premarket.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291;
joan.solsman@dowjones.com