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Simon ends mall takeover bid

Sat., May 8, 2010, midnight

Bankruptcy ruling raises price for General Growth

LOS ANGELES – Simon Property Group Inc. on Friday withdrew its $6.5 billion bid to acquire rival shopping mall owner General Growth Properties Inc., following a bankruptcy court ruling that Simon said would have made the deal too expensive.

The move ends a months-long campaign by the nation’s largest shopping mall owner to take over its closest competitor. It was an unlikely bidding war for a company that just over a year ago had the dubious honor of being the biggest real estate bankruptcy case in U.S. history.

The plan approved by U.S. Bankruptcy Court Judge Allan Gropper in New York would enable General Growth to emerge from Chapter 11 bankruptcy protection as a standalone company. Under the plan, General Growth would receive $6.5 billion from an investor group led by Canadian property manager Brookfield Asset Management Inc.

But the deal also included a provision that would give the Brookfield consortium stock warrants worth potentially more than $500 million if General Growth went with another bidder.

Simon Property said that would make any acquisition too costly, and abandoned its latest offer Thursday of $6.5 billion, or $20 a share. That offer had topped one for $18.25 a share just days earlier.

“We cannot reach a mutually beneficial transaction,” Simon Property Group Chairman and CEO David Simon said Friday.

He also blasted the General Growth board of directors, saying it “hastily decided in less than 24 hours to accept substantially less value.”

Simon said the Brookfield-led deal values General Growth at least $5 a share less than its own offer when one accounts for the warrants.

Under terms of Friday’s deal, General Growth would exit bankruptcy as two separate companies. The new General Growth Properties would own traditional shopping mall properties. The second company, called General Growth Opportunities, would own a diverse asset portfolio.

General Growth shares tumbled $1.77, or more than 11 percent, to $14.07 on Friday. The stock added 3 cents in aftermarket trading.


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