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Simon Property (SPG) Finally Concludes Taubman Centers Buyout

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Simon Property Group (SPG - Free Report) has finally completed the acquisition of Taubman Centers, Inc., ending an almost year-long story that included an initial deal as early as February this year. However, the intended transaction was later subjected to attempts of termination and lawsuit in June before the concerned parties went in for negotiations and settled for a lower purchase price in November.

Per the agreement, the retail REIT through its operating partnership acquired all of Taubman Centers Inc.’s common stock for $43 per share in cash. The current purchase is 18% less than the previously-agreed $52.50 in February.

According to David Simon, chairman, CEO and president of Simon Property, the transaction adds “some of the world's premier retail assets” to the company’s portfolio.

The total consideration for the buyout was $3.4 billion and included redemption of preferred shares. Simon Property funded the purchase with its existing liquidity including proceeds from its recently-concluded equity offering.

Precisely, Simon Property acquired 80% ownership stake in The Taubman Realty Group Limited Partnership (TRG) with the Taubman family remaining a 20% partner in TRG, which sold roughly one-third of its stake at the transaction price.

Amid the retail apocalypse narrative, adoption of an omnichannel strategy and its successful tie-ups with premium retailers are a saving grace for Simon Property. The company had been consistently restructuring its portfolio, aiming at accretive acquisitions and transformative redevelopments.

Moreover, dependence on value-adding opportunities and the acquisition of troubled retailers are on Simon Property’s 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 consciously averting crowded public spaces due to the prevalent pandemic conditions and are increasingly opting for online purchases. This, in turn, is taxing 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) , Federal Realty (FRT - Free Report) and Kimco (KIM - Free Report) , et al.  

Shares of this currently Zacks Rank #5 (Strong Sell) company have depreciated 44.1% so far in the year, wider than its industry’s decline of 13.3%.

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

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