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Simon Property (SPG), Taubman Centers (TCO) Lower Merger Price

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After backing out of the merger deal with Taubman Centers, Inc. in June, Simon Property Group, Inc. (SPG - Free Report) has now negotiated the share price for purchasing the majority stake in the former company.

Both companies have reached a definitive agreement to change certain terms of the original merger agreement. Now, Simon Property will pay the purchase price of $43 per share in cash, down 18% from the previously-agreed price of $52.50 in February.

Moreover, per the modified merger agreement, Taubman Centers will not pay a dividend on its common stock before Mar 1, 2021.

Nonetheless, Simon Property will continue to acquire an 80% ownership stake in The Taubman Realty Group Limited Partnership ("TRG"), while the Taubman family will remain a 20% partner. The revised terms of the merger have been approved by the board of directors of both companies and Taubman Centers’ Special Committee of independent directors.

The merger is anticipated to close in late 2020 or early 2021, conditional to Taubman Centers’ shareholder approval and customary closing norms.

Notably, on Jun 10, Simon Property called off its merger agreement with Taubman Centers by exercising its contractual rights to the termination,based on two separate and independent grounds.  First, the coronavirus pandemic has significantly impacted Taubman Centers’ operations, relative to other retail real estate industry peers.

Moreover, amid the coronavirus mayhem, Taubman Centers breached its obligations to operate its business in the ordinary course. Particularly, unlike others in the industry, the company was unable to take necessary steps to mitigate the impacts of the pandemic, including failing to make essential reductions in operating expenses and capital expenditure.

With the termination of the deal, Simon Property also filed a lawsuit against Taubman Centers. Nonetheless, both companies have now settled their pending litigation in Michigan state court.

Shares of Simon Property have plunged 51.4% over the past year compared with the industry’s decline of 16.5%.

 

 

It carries a Zacks Rank #5 (Strong Sell) at present.

Currently, Taubman Centers carries a Zacks Rank of 3 (Hold).

Stocks to Consider

Alpine Income Property Trust, Inc.’s (PINE - Free Report) funds from operations (FFO) per share estimates for 2020 have been revised upward by 1.7% to $1.21 over the past month. The company carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extra Space Storage Inc’s (EXR - Free Report) Zacks Consensus Estimate for 2020 FFO per share has moved upmarginally to $5.02 over the past week. The company currently carries a Zacks Rank of 2 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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