Monday, April 26, 2010

Anti-trust and the Simon GGP Bid

Last week the Simon Property Group revised their offer to General Growth Properties board. According to this story in Reuters, the owner of the Arundel Mills mall is now “asking for two General Growth board seats as part of the deal, down from three earlier, sources familiar with the situation said.”

“Under General Growth's current plan, it would see a $6.55 billion cash infusion from Brookfield and investors Fairholme Capital Management and William Ackman's Pershing Square Capital.

That offer includes the three capital sources receiving warrants to buy 120 million shares, with Brookfield getting half of them.

Simon, whose initial offer to take over all of General Growth was rebuffed, has countered with an offer to replace all these investors without any warrants. It has not abandoned its plans to make a new run for the entire company either.”

The notion of a General Growth/Simon merger is not sitting well with retailers. If Simon prevails it could end up owning or controlling half of the Class A shopping malls in the country. That would give the company an incredible amount of leverage in negotiating leases.

According to this article by Todd Sullivan in Seeking Alpha, “Fewer options and a consolidation of ownership in Class A malls would place retailers at a competitive disadvantage.”

Judge Allan Gropper is expected to rule on GGP’s plans to exit bankruptcy this Thursday.


Freemarket said...

I don’t think this is a big deal that Simon might control 50% of Class A shopping malls (whatever those are). Malls seem to become less relevant every year as consumers prefer big boxes or online shopping. Besides, malls pretty much have a monopoly over their geographical areas anyway, regardless of who owns them.