“Learn from yesterday, live for today, hope for tomorrow.”
Russ Wiles, The Republic | azcentral.com 11:58 a.m. MST March 17, 2015
- Macerich Co., which operates 19 shopping centers and office properties in Arizona, has rejected a $22.4 billion bid from rival mall operator Simon Property Group.
- Macerich claims Simon’s bid undervalues the company. Macerich touted its portfolio of “trophy assets” including several in Arizona.
- In an open war of words, Macerich’s CEO shot back at his rival at Simon Property, who had issued a letter of his own two weeks ago.
- Simon Property responded by accusing Macerich of conducting a “scorched earth response.
Macerich’s “trophy” properties
Macerich listed 10 top malls across the nation including these three in Arizona that it considers among its best. The company included average sales generated per square foot at the locations. The company’s top property is Queens Center in Queens, N.Y., with sales per square foot of $1,088.
- Biltmore Fashion Park, Phoenix, $865/square foot
- Tucson La Encantada, Tucson, $733/square foot
- Scottsdale Fashion Square, Scottsdale, $732/square foot
Macerich Co. has turned thumbs down to a $22.4 billion takeover bid by rival Simon Property Group, putting 19 Arizona developments including some of the state’s premier shopping centers in limbo.
In a statement, Macerich today said its board determined that the bid of $91 a share “substantially undervalues” the company and would not be in the best interests of its shareholders. Macerich said its real estate portfolio “contains many trophy assets of a kind that rarely become available for sale and cannot be replicated.”
Simon Property responded almost immediately, slamming Macerich for its “scorched-earth response” and accusing the firm of not trusting its own shareholders.
Macerich also highlighted some changes to its board structure that could make a hostile takeover more difficult. The company’s stock was down $3.14 a share at $91.71 in high trading volume around noon Arizona time. The stock has surged from under $70 a share in November, when Simon first announced that it had accumulated 3.6 percent of Macerich’s stock. If the bid falls through and Macerich’s stock price slumps, it could unleash a shareholder backlash.
In an investor presentation, Macerich highlighted 10 of its trophy malls including three in Arizona — Biltmore Fashion Park, Tucson La Encantada and Scottsdale Fashion Square. The company said it generates 17 percent of net operating income from Arizona, behind only California (29 percent) and New York (18 percent). Macerich actually has more malls and office developments in Arizona than California, with New York third.
While only about one-quarter the size of Simon in terms of revenue and stock-market worth or capitalization, Macerich indicated it had higher-quality assets and other advantages compared to Simon. It also claimed that combining two of the three largest mall operators could present anti-competitive concerns.
In what has become an acrimonious pen-pal relationship, Macerich released an open letter from Arthur Coppola, its chairman and chief executive officer, to David Simon, his counterpart at Simon Property, in which Coppola underscored Macerich’s ability to upgrade its properties and increase sales per square foot.
“Our board recognizes that, as a competitor, these trends present a challenge for you on multiple fronts,” Coppola wrote.
He also accused Simon Property of not providing transparent performance results for the company’s malls and outlets and said a side deal between Simon and General Growth Properties, a third mall operator, “is problematic and not only stockholder-unfriendly but also raises questions of legality.” As part of its bid, Simon said it would sell certain Macerich properties to General Growth, seen as a way to ease anti-competitive concerns.
Coppola’s letter follows one issued a week ago by David Simon in which he outlined the acquisition proposal and complained about not receiving a response from Macerich.
In today’s response, Simon Property rapped Macerich for not even discussing the takeover proposal and slammed the smaller company for worsening its own corporate governance by staggering its board. Simon also said it remains comfortable that there are no legal obstacles or other impediments to the deal “aside from the Macerich board.”
In addition, Indianapolis-based Simon Property said it has “outpaced Macerich in virtually every operating and financial category.” Macerich is headquartered in Santa Monica, Calif.
Arizona is one of the potential prizes for Simon Property if a takeover were to succeed, as the nation’s largest mall operator has only two such properties here — Arizona Mills in Tempe and Phoenix Premium Outlets in Chandler — with a third being built near Tucson in Marana.
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