Brookfield Offers To Acquire Rouse
January 20 2016 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 1/20/16)
By Ben Dummett
Canada's Brookfield Asset Management Inc. said Tuesday it made
an all-cash unsolicited offer to buy the majority stake of Rouse
Properties Inc. that it doesn't already own for about $657 million,
taking advantage of the U.S. mall operator's depressed
valuation.
New York-based Rouse, which operates 35 malls across the U.S.,
said it received the offer from the Canadian asset manager on
Saturday and formed a special committee to consider it.
Brookfield oversees $123 billion in commercial and residential
real estate, spread across North America, parts of Europe, Asia and
South America. Its bid for Rouse underscores the Toronto-based
company's focus on using its financial muscle and scale to acquire
out-of-favor real-estate assets.
The offer comes at a time when the stocks of Rouse and many
other U.S. shopping-mall rivals are under pressure amid concerns
their earnings are at risk due to overbuilding and the rise of
e-commerce.
The amount of retail space in the U.S. peaked at 50 square feet
per person before the financial crisis, but has been falling since
then because while malls are closing, excess supply is preventing
developers from building new ones, said Suzanne Mulvee, a director
of research at CoStar Group Inc., a real-estate consultant.
Still, Rouse has fared reasonably well even as its stock price
has slumped, benefiting from moves to redevelop some of its malls
to boost sales and giving up on some money-losing operations.
For the first nine-months of 2015, Rouse generated operating
income of $38.2 million, surpassing the $31.4 million it produced
in all of the prior year. Even so, its stock price, before a surge
Tuesday, is down about 30% over the past year.
"Brookfield could use Rouse as a platform to consolidate the
sector, providing capital to acquire and redevelop assets and
portfolios," said Floris van Dijkum, an analyst at Boenning &
Scattergood.
A Brookfield spokesman declined to comment.
Rouse was created in 2012 from a spinoff of a portfolio of 30
malls by General Growth Properties Inc., of which Brookfield owns a
33% stake. It acquired that stake by leading a $30 billion
restructuring of the mall owner to help it emerge from bankruptcy
protection in 2010. General Growth currently has a market value of
about $23.9 billion.
Brookfield already owns about 33% of Rouse's shares outstanding.
It is offering $17 a share for the stake it doesn't own, which
represented a 26% premium to Rouse's closing price Friday.
The bid values Rouse at about $1 billion.
Rouse closed up almost 30% in U.S. trading on Tuesday at $17.50,
indicating that investors expect Brookfield to raise its offer.
The "proposal may be a starting point for negotiations," KeyBanc
Capital Markets said in a report.
(END) Dow Jones Newswires
January 20, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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