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Simon (SPG) Nears Taubman Centers Merger With Shareholders' Nod

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Simon Property Group (SPG - Free Report) is inching closer to complete the merger of Taubman Centers, Inc. as the latter’s shareholders gave the nod for the transaction at a special meeting of shareholders held recently.

Particularly, the Taubman Centers’ shareholders approved and adopted the prior-announced amended and restated merger agreement, dated as of Nov 14, 2020 among the company, The Taubman Realty Group Limited Partnership, Simon Property and certain other parties. The transactions are now expected to close either in the remaining days of the current year or by early 2021, subject to customary closing norms.

Notably, after backing out of the merger deal with Taubman Centers in June, Simon Property Group negotiated the share price for purchasing the majority stake in the former company in November, reaching a definitive agreement to change certain terms of the original merger agreement.

With such moves, Simon Property will now pay the purchase price of $43 per share in cash, down 18% from the previously-agreed price of $52.50 in February. Also, per the modified merger agreement, Taubman Centers will not pay any dividend on its common stock before Mar 1, 2021.

Simon Property will continue to acquire 80% ownership stake in The Taubman Realty Group Limited Partnership (TRG) while the Taubman family will remain its 20% partner, selling roughly one-third of its ownership interest at the transaction price. (Read more: Simon Property, Taubman Centers Lower Merger Price)

Amid the retail apocalypse, adoption of an omnichannel strategy as well as successful tie-ups with premium retailers proved to be a saving grace for Simon Property. Moreover, in light of the pandemic, the omni-channel business model become all the more essential among several store retailers while digital brands are focusing on enhancing their brick-and-mortar presence, and playing key roles in meeting orders. Simon Property too remains focused on tapping such opportunities and recently teamed up with Mango to assist the latter’s growth strategy in the United States with the launch of its stores in 2021.

Moreover, reliance on value-adding opportunities and the purchase of troubled retailers are on Simon Property’s latest agenda. This opens up new growth avenues as the company can utilize such brands across its bricks-and-mortar footprint.

Nonetheless, physical store businesses widely depend on customer traffic but consumers are avoiding crowded public spaces due to the prevalent pandemic and are increasingly opting for online purchases. This, in turn, is taking a huge toll on tenants’ liquidity, thereby making it difficult to meet their rental obligations. As a result, retail REITs, which have been already battling against store closures and bankruptcy issues for long, are feeling the heat. Apart from Simon Property, this is affecting other retail REITs like Macerich (MAC - Free Report) and Kimco (KIM - Free Report) , et al.

Both Simon Property and Taubman Centers currently carry a Zacks Rank #5 (Strong Sell).

Here is how both retail REITs have performed in terms of price over the past six months compared with the industry’s average.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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