Simon Offers $10B for General Growth

Simon Property Group Inc. dropped a bombshell in announcing this morning that it has made a $10 billion offer to acquire General Growth Properties Inc.

Simon, the Indianapolis-based REIT with the largest portfolio of malls in the U.S., issued a detailed release early Tuesday morning saying that it had made a written offer to acquire Chicago-based General Growth Properties Inc. in a fully financed transaction valued at more than $10 billion, including approximately $9 billion in cash. The firm sent a letter to General Growth on February 8, to which it got no response, along with a follow-up letter dated today. (The full texts of both letters can be viewed at this post.)

Simon’s offer would guarantee General Growth’s unsecured bondholders a “100 percent cash recovery of par value plus accrued interest and dividends.” Simon estimates this consideration to be worth approximately $7 billion. In addition, General Growth’s shareholders would receive more than $9.00 per share, consisting of $6.00 per share in cash and a distribution of General Growth’s ownership interest in the Master Planned Community assets valued by General Growth at more than $3.00 per share. Simon is also prepared to offer Simon common equity instead of the cash consideration, in whole or in part, as payment to those General Growth shareholders or creditors who would prefer to participate in the upside of owning stock in Simon. Under Simon’s offer, the existing secured debt on General Growth’s portfolio of assets would remain in place.

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