Simon Property To Acquire Taubman Center For $3.60bln.

Simon Property To Acquire Taubman Center For $3.60bln.
February 12, 2020

 

Simon Property Group (NYSE: SPG) is acquiring the shopping complex owner Taubman Center (NYSE: TCO) in a deal worth $3.60 billion. The deal has come at a time when shopping mall operators are finding it hard to attract shoppers, who find it convenient to purchase products online or at strip malls (a complex where stores are arranged in a row, with a sidewalk in front). Both firms are competitors and categorized as self-administered and self-managed real estate investment trust (REIT). The shares of both Taubman Centers and Simon Property Group closed almost flat at $53.15 and $142.08, respectively. The shares of Simon, which commands a market value of $43.60 billion, has lost 24% in the past year.

Under the acquisition deal, Indiana based Simon will buy Michigan based Taubman’s stock for $52.50 per share, mirroring a 51% premium to last Friday’s closing price.

Simon Property Group, which owns and operates top-tier shopping malls, stated that it anticipates the acquisition to quickly result in an increase in its funds from operations at the rate of at least 3% on an annualized basis. The prominent properties owned by Simon Property Group are King of Prussia Mall outside Philadelphia, Copley Place in Boston and Town Center at Boca Raton in Florida.

Following the completion of the deal, Taubman will continue to be administered by Robert Taubman, current Chairman, President and CEO. The firm owns, administers, or leases 26 shopping centers in the US and Asia, including the Beverly Center in Los Angeles and The Mall at Short Hills in New Jersey.

As part of the acquisition deal, the Taubman family will divest one-third of their stake, leaving behind a 20% stake in Taubman Realty Group LP. The acquisition deal is anticipated to be completed within roughly six months. With foot traffic on a decrease, several malls such as Macy’s have filed for bankruptcy protection and shut down their stores.

Shopping mall operators are trying to end the decline in foot traffic by offering enhanced services and entertainment.

Simon Property Group’s CEO and President David Simon explained the benefits of this acquisition to both parties: “By joining together, we will enhance the ability of [Taubman Reality] to invest in innovative retail environments that create exciting shopping and entertainment experiences for consumers, immersive opportunities for retailers, and substantial new job prospects for local communities.”  

As usual, the acquisition deal is subject to shareholder and regulatory approval. Notably, the Taubman family, which holds about 29% voting rights, has already accepted to back the agreement with their vote. For the transaction to be approved, a minimum of two-thirds of the outstanding Taubman voting stock and overwhelming stock not possessed by the Taubman family should back the deal.

Simon has made similar deals in the recent past. The company joined hands with the US mall operator Brookfield Property Partners and Authentic Brands in an effort to take over Forever 21 for $81 million. Notably, the Los Angeles, California based fast-fashion retailer filed for Chapter 11 bankruptcy protection in September. Simon owns and operates more than a dozen stores in Forever 21malls.

The news of acquisition at a considerable premium is expected to keep the stock of Taubman Center bullish in the short-term.

The historical price chart indicates that the stock of Taubman Center has closed above its 20-day moving average. Additionally, the ultimate oscillator is rising towards the bullish zone. The stock has strong support at 30, and the next resistance is anticipated only near 40. Therefore, we are expecting the stock to appreciate further in the near-term.

tco - technical analysis - 12th Feb 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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