Simon cuts discount deal to buy Taubman, halt COVID-related merger suit

Indianapolis-based Simon Property Group has negotiated a $656 million cut in the price it will pay to purchase a Michigan-based shopping center company in light of the pandemic — a deal that comes just in time to stop a trial that was set to start Monday.

Simon, the nation’s largest mall owner, agreed in February to pay $3.6 billion in cash for 80% of Taubman Centers Inc.

But Simon announced in June it was pulling out of that deal, arguing that the pandemic had caused a disproportionate decline in Taubman’s business that triggered “material adverse effect” language in the merger agreement.

Taubman disagreed, but Simon sued, seeking a court declaration validating its right to walk away from the transaction. A trial in Oakland County (Michigan) Circuit Court was to begin Monday. The companies said on Sunday night they had settled that lawsuit.

The amended deal still calls for Simon to buy 80% of Taubman shares but at just $43, down from $52.59 in the original deal.

The boards of both companies have agreed to the terms, officials said. The modified merger agreement provides that Taubman will not declare or pay a dividend on its common stock prior to March 1 — and then only subject to certain limitations and conditions.

The merger is expected to close in late 2020 or early 2021, after approval by Taubman shareholders.

Taubman owns, manages or leases 26 super-regional shopping centers in the United States and Asia with 25 million feet of space. Simon owns or has a stake in more than 200 retail properties in the United States and also has international holdings.

Taubman stock closed at $39.48 on Friday. Simon closed at $74.70.

In June, Simon said it had terminated the deal because “the COVID-19 pandemic has had a uniquely material and disproportionate effect on Taubman compared with other participants in the retail real estate industry. Second, in the wake of the pandemic, Taubman has breached its obligations, which are conditions to closing, relating to the operation of its business.”

Simon said Taubman has been hit particularly hard by the pandemic because a “significant proportion of its enclosed retail properties” are “located in densely populated major metropolitan areas” and rely heavily on tourism.