Simon Set To Save $800M As It Reaches Merger Deal With Taubman At Reduced Price

Simon Property Group, Inc. (NYSE: SPG) and real estate investment trust Taubman Centers, Inc. (NYSE: TCO) have agreed to follow through on their merger deal at a revised price.

What Happened: Simon Group will pay $43 per share to acquire an 80% stake in Taubman Realty Group Limited Partnership. The original deal terms, proposed in February, were for a purchase consideration of $3.6 billion at $52.50 per share. The Taubman family will continue to hold a 20% controlling interest in the realty partnership company.

Another clause in the revised terms prohibits Taubman from declaring dividends until March 1 next year.

Why Does It Matter: The initial acquisition deal was drafted before the onset of the COVID-19 outbreak. Since March, retail businesses were hit hard due to forced lockdowns.

Simon Group’s stock is trading 48.5% lower on a year-to-date basis and 39% lower from the beginning of March to date. In comparison, Taubman stock has tanked 24% since March.

Although the Simon-Taubman deal is more real-estate centric, there have been instances of revised merger terms due to a dip in the retail business. Jewelry retailer Tiffany & Co (NYSE: TIF) agreed to a 2.6% lower acquisition price, from the original $135 per share to a revised $131.50 per share, for its merger deal with LVMH Moet Hennessy Louis Vuitton SA (OTC: LVMUY).

Simon Group stands to save $800 million in the deal, based on Sunday's disclosure. The amended acquisition agreement marks the end of a legal dispute in Michigan between the two companies.

Price Action: At the end of Friday’s trading session, TCO was quoting $39.48, 5.53% higher. Whereas SPG stock gained 8% to close at $74.70.

Photo courtesy: Daniel Case via Wikimedia