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

Simon Property Group, Inc. SPG and real estate investment trust Taubman Centers, Inc. 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 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 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