Simon Properties Group Inc. (SPG) on Monday, Feb. 10, announced a deal to acquire embattled shopping mall operator Taubman Centers Inc. (TCO), in a deal that comes after years of activist involvement and merger speculation around the target.
The $3.6 billion, $52.50 per share deal, calls for Simon Property to acquire 80% of Taubman, including 10% of the roughly 30% stake held by the Taubman family. The family will continue to hold a 20% stake.
Jonathan Litt, of Land and Buildings Investment Management LLC, recently stepped down from the company’s board, according to relationship mapping service BoardEx, a sister company of The Deal, though the activist had held a seat for about 12 months.
He overcame overwhelming odds to gain his seat on the board in May, 2018, in an effort that ended more than three years of agitation.
To gain a board seat, Litt was able to overcome the Taubman family’s hefty 30% stake in the company and opposition to his efforts to push for change at the 70-year-old mall property company. Litt was able to gain the backing of Vanguard Group in his bid, according to sources, which represented a big shift considering that both Vanguard and its counterpart BlackRock Inc. (BLK) had voted against Litt in a contest he lost in 2017.
Litt had pressured Taubman Centers to privatize or sell itself for at least three years, including his most recent bid to gain a board seat.
The bid also ends years of speculation around a Simon-Taubman tie-up. In 2003, Simon Properties and Westfield America made a joint hostile bid to acquire Taubman Centers, though the offer proved unsuccessful. Speculation has arisen at times over the years that Simon Properties continued to express an interest in buying Taubman.
Shares of Taubman have trended downward in recent years, driven by secular declines and continuing troubles at shopping mall operators. Litt’s efforts since 2016 suggest that the buyout wasn’t a success for his fund. Litt tweeted Monday that he was “pleased to see ” Taubman take action for shareholders in a sale to Simon. He also questioned whether the deal would lead to “more transactions” in the mall space.
Litt first launched a public campaign at Taubman Centers with an October 2016 letter urging strategic alternatives. At the time Litt owned about 1% of Taubman Centers and its shares were trading in the $70 per share range.
Litt’s fund owned 1.4 million shares, according to a Nov. 14 filing. It is possible that Litt could have returned with another director contest by the REIT’s March 1 deadline for nominating director candidates had a deal not been struck first. Overall, L&B had 30% returns in 2019 for its real estate focused funds, according to sources.
Monday’s deal represents a 51.4% premium to Taubman’s Feb. 7 closing price of $34.67 a share and an 85.8% premium to its closing price on Feb. 3, $28.25 a share, the trading day prior to a Bloomberg report that the two companies had held merger discussions, according to SunTrust Robinson Humphrey analysts.
The transaction, which is subject to shareholder approval, is expected to close in mid-2020.
Kirkland & Ellis LLP partners Eric Schiele, Michael Brueck and Marshall Shaffer advised a special board committee of Taubman Centers on the deal. Lazard’s Matthew Lustig, Phillip Summers and Matthew O’Grady provided financial advice to the special committee of the board.
A Wachtell, Lipton, Rosen & Katz team of Adam Emmerich, Robin Panovka and Viktor Sapezhnikov and Honigman LLP’s Joseph Aviv provided legal advice to Taubman. Goldman Sachs & Co.’s Mike Graziano, Zach Eckler, Kellan Florio and Yingying Tan provided financial advice to Taubman.
BofA Securities’ Jack Vissicchio, Steven Baronoff provided financial advice to Simon Properties and Paul, Weiss, Rifkind, Wharton & Garrison LLP’s Robert Schumer, Michael Vogel and Latham & Watkins LLP’s Julian Kleindorfer, Mark Gerstein and Jason Morelli served as the buyer’s legal advisers.
—David Marcus contributed to this report.