Wednesday, February 13, 2013

Mall Fight Twilight: GGP Off 11% as SPG Bows Out

One of the Dow Defyers today was Simon Property Group (SPG), the nation’s largest owner of mall properties, which today gave up in its quest to acquire number 2 player General Growth Properties (GGP), which is going through a bankruptcy reorganization.

Simon shares rose 80 cents, almost 1%, to $85.68.

CEO David Simon called it “unfortunate” for GGP shareholders that the latter had decided not to consider a revised offer of $20 per share for GGP, made yesterday.

Earlier today, Pershing Square Capital, one of General Growth’s backers, had voiced its objection to SPG’s offer, saying that Pershing would even give up warrants to purchase 17 million shares of GGP to stop SGP’s offer.

The battle, which has gone on since Simon’s first proposal on April 14, forced GGP to react. On Monday, GGP revised a deal to recapitalize itself through assistance from Brookfield Asset Management (BAM) and Fairholme Funds, two of its major creditors.

Under the new terms, Brookfield raised the additional “capital back-stop” to $2 billion, including $1.5 billion in new debt to be issued and a $500 million equity rights offering, on top of the existing $6.55 billion in new capital injected into the company.

And general growth said the warrants it was issuing to investors would vest over time, instead of immediately, with 40% vesting once bankruptcy court approval was reached. Brookfield also raised the exercise price on the warrants issued.

General Growth shares, with the removal of Simon’s bid, have fallen 11% to $14.07.

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