General Growth Properties
The No. 2 U.S. mall owner is faced with a takeover bid by its larger rival, Simon Property Group
The two, however, have not engaged in formal discussions and the takeover bid has rapidly escalated this week into a public brawl, with Simon pressuring General Growth to begin talks, while the bankrupt company looks to pursue an exit process on its own terms.
General Growth, responding to a strongly worded Simon letter from Wednesday, said it wants to maximize value for its constituents and was engaging in a process to do that fast.
Understandably, your objectives are not aligned with ours, it said in the letter to Simon. We hope you will, nonetheless, participate in our process.
General Growth offered Simon Property a nondisclosure agreement in December, but Simon did not sign it, the source said.
Another source familiar with the situation said Simon did not sign the agreement because it found it too restrictive.
Simon, eyeing its rival's more than 200 malls, has accused General Growth of inappropriately speculating with creditors' money. It has argued that its offer provides a full cash recovery for unsecured creditors while reducing risk and providing potential upside.
General Growth is pursuing a plan that would allow it to emerge from bankruptcy as a stand-alone entity. It has been in talks with investors for months and has been approached by numerous parties, including Brookfield Asset Management
But it expects the public markets should be far cheaper than capital from a private source like Brookfield or anyone else, the source said.
Both sources did not want to be identified because the talks are not public. Simon did not have an immediate comment. General Growth, owner of such marquee properties as Fashion Show in Las Vegas, Ala Moana Center in Hawaii and Faneuil Hall Marketplace in Boston, declined to comment beyond its statement.
General Growth, which became the biggest real estate failure in U.S. history when it filed for bankruptcy in April, has the exclusive right to come up with its own reorganization plan through late February. It recently asked a U.S. bankruptcy court for permission to extend that period by six months.
The Chicago-based company believes that what triggered Simon's move to go public with its offer was the worry that General Growth would succeed in raising the funds it needs to exit from bankruptcy in a few weeks, the first source said.
It sees Simon's bid as an attempt to convince the judge to deny the company an extension of the exclusivity period, which would potentially allow General Growth's unsecured creditors to file a competing plan backed by Simon, the source said.
But General Growth believes that if the creditors are paid in full, they should not have the right to that, even if the exclusivity extension is denied, the source said.
It believes the only party whose value would still be uncertain are the equity holders, the source said, adding that about half of General Growth's equity is held by board members, who include investor William Ackman.
General Growth's stock was off 1.3 percent to $12.75 a share in afternoon trading, while Simon was up 2 percent to $77.39.
(Reporting by Paritosh Bansal, additional reporting by Ilaina Jonas; Editing by Tim Dobbyn, Gary Hill)