Last Friday Simon Properties Group (SPG, Financial) announced that it just made its best an final offer for rival Macerich (MAC, Financial) and boosted its bid by 4.9% to $95.50 per share. The new cash and stock offer values Macerich at $16.8 billion not including debt. Simon Properties first bid was rejected outright by Macerich for being to low. The first offer was $91 per share in cash and stock deal which Macerich board said undervalued the company.
After Macerich rejected Simons first bid, its CEO David Simon said, "Macerich’s decision to adopt extreme defensive measures is disappointing.”
Simon Properties highlights that its new offer represents a 37% premium to Macerich closing price the day before they announced a 3.6% stake in Macerich.
Macerich reaction and overview
Macerich board made it clear that the offer of $91 per share did not reflect the true value of the firm and outright rejected the offer.
The company's Chairman and CEO Arthur Coppola said, " After careful consideration, the Macerich board of directors unanimously determined that Simon Property Group’s unsolicited proposalsignificantly undervalues Macerich and fails to reflect the full value of our portfolio of unique and irreplaceable assets and our positive growth prospects.”
The company is one of the leading owners, developers and operator of retail properties throught the United States. Over the past five years Macerich has achieved an total shareholders return of 186% which represents a yearly compound return of 23%. The company sold its low quality malls to fund its high valued accretive developement pipeline over the past two years.
Factors why they turned down the offer
Macerich board said it considered several factors in rejecting Simon's offer which included the following:
- The irreplaceable nature of its portfolio of high quality, regional shopping centers in prime locations
- The board’s confidence in the strategic plan of Macerich and ability to execute it.
- The company’s success in transforming its portfolio over the past two years by selling lower quality malls and reinvesting the capital into value-enhancing redevelopment opportunities, which increased its sales from $517 to $587 per square foot.
- Macerich’s development pipeline is highly-valuable. The company plans to spend $400 million to $500 million annually on high-return-on-cost projects over the next five years. The projects are expected to materially enhance stockholder value.
- Macerich’s inability to evaluate the claims of Simon Property Group regarding its margins because it does not disclose separate performance data between mall and outlet portfolios.
- The board of directors of Macerich believed that there are significant challengers in consummating the proposed transaction of Simon Property Group due to serious questions under applicable state and federal laws.
- Macerich’s board also believed that the Simon Property Group’s partnership with General Properties raises legality questions and stockholder-unfriendly.
Macerich hasn't responded to the second bid yet and if I'm a betting man and I'm not, they will say no to the second bid.
