- The Washington Times - Wednesday, March 11, 2015

A full-fledged battle of the malls has broken out as the company that owns Tysons Corner Center has rejected a surprise buyout offer from the company that owns Northern Virginia rival the Fashion Centre at Pentagon City.

Indianapolis-based Simon Property Group, owner of the country’s largest string of shopping properties, quickly condemned Tuesday the decision by the board of California-based Macerich Co. to reject its unsolicited $22 billion offer and to adopt new measures to prevent a hostile buyout.

Simon Property Group Chairman and CEO David Simon, in a statement posted to the company’s website, railed against Macerich’s “scorched earth” decision, calling the rejection a usurpation of shareholders’ rights and hinting the takeover battle wasn’t over.

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“The Macerich Board clearly does not believe its shareholders can be trusted to decide the composition of its board when the value of their investment hangs in the balance,” Mr. Simon wrote.

The news sent Macerich’s stock down more than 3 percent, falling $3.47 to close at $91.60 on the New York Stock Exchange. Simon Property also fell, although more modestly, closing down 94 cents, or 0.5 percent, at $186.13.

The golden era of suburban megamall construction has ended, but high-end properties such as Tysons and the Pentagon City mall remain highly attractive to investors. Officials at Macerich, the nation’s No. 3 shopping mall owner, with full or part ownership in some 51 malls, said the hostile Simon Property bid severely understated the company’s worth.

The company also said that it has concerns over Simon Property’s plan to sell some of its assets to fellow mall operator General Growth Properties Inc.

Macerich is selling its more downscale malls in a bid to boost the company’s sales per square foot from $517 to $587. Macerich officials also cited plans on spending $400 million to $500 million per year on high-return-on-cost projects that the project will bolster stockholder value.

Simon is a real estate investment trust that operates more than 200 properties in the United States, with a heavy presence in Florida, Texas and California, among other states. It also runs shopping centers in Canada, Japan, Mexico and other countries.

“After careful consideration, the Macerich board of directors unanimously determined that Simon Property Group’s unsolicited proposal significantly undervalues Macerich and fails to reflect the full value of our portfolio of unique and irreplaceable assets and our positive growth prospects,” said Arthur Coppola, Macerich chairman and CEO.

“Our portfolio contains many trophy assets of a kind that rarely become available for sale and cannot be replicated. Most could not be built today, and substitutes do not exist,” Mr. Coppola said.

Macerich also contended Simon Property was underestimating the potential antitrust concerns of the deal, a charge Simon Property officials denied.

The rejected deal — which offered Macerich shareholders a 30 percent premium of $91 a share in equal amounts of cash and stock — would have placed Indianapolis-based Simon atop the nation’s shopping center food chain, with more than 300 properties.

In addition to rejecting the Simon bid, the Macerich board approved two governance changes aimed at thwarting future hostile bids, staggering the election of directors and adopting a “poison pill” defense that raises the price Simon would have to pay because more shares of Macerich would be issued.

Mr. Simon said Macerich shareholders should put pressure on the board to reconsider.

“Given this extreme, scorched-earth response, shareholders should scrutinize the actions and motives of the Macerich board,” Mr. Simon wrote.

Analysts suggested Simon may be prepared to test Macerich’s defenses with a sweetened bid.

“I would expect they would come back with a higher offer, then shift the response back to Macerich to either accept or refuse,” Jeffrey Langbaum, a REIT analyst with Bloomberg Intelligence, told the Bloomberg Business news service.

⦁ This article was based in part on wire service reports.

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