US real estate investment trust firm and shopping center operator Taubman Centers has just agreed to be taken over by the country's largest shopping mall operator Simon Property Group. The acquisition deal is estimated to have a value of around $3.6 billion.
Following the announcement of the acquisition deal, Taubman Centers' stock prices skyrocketed by up to 52 percent on Monday. Simon Property Group's shares, on the other hand, edged upward by close to 1 percent in premarket trading. Simon Property's stock, which currently has a market value of $45.2 billion, has so far declined by 24 percent over the past 12 months.
Under the deal, Simon Property agreed to buy Taubman's stock for $52.50 per share. This represented a 51 percent premium on Taubman's shares as of last week's closing. Simon Property currently operates well-know American properties such as King Prussia Mall in Philadelphia, the Town Center at Boca Raton in Florida, and the Copley Place in Boston.
Simon Property, which operates mostly top-end shopping malls all around the country, announced that it expects the deal to bolster its earnings from operations in the coming quarters. The company expects at least a 3 percent boost on an annualized basis as a direct result of the acquisition.
After the acquisition, Taubman's current chairman and CEO, Robert Taubman, will remain with the merged to the company to manage Taubman's properties. This will include its well-known properties such as The Mall at Short Hills in New Jersey and the Beverly Center in Los Angeles. Taubman's family has also agreed to sell a third of their stake in the company, leaving them with a 20 percent take overall.
The massive merger comes as US mall operators continue to struggle amid decreasing foot traffic in traditional shopping centers. In light of the rising popularity of online shopping and quick home deliveries, mall operators have been struggling to lure shoppers. The declining foot traffic has caused a number of brick-and-mortar retailers to close down shops, with others already declaring bankruptcy.
Simon Property president, David Simon, mentioned in a press release that the merger of the companies should enhance its ability to invest in innovative retail environments to attract more customers. The company hopes that adding unique shopping and entertainment experiences through immersive developments would get shoppers back into traditional shopping centers and away from their phones and computers.
The deal is to be completed within the next six months. It is however still subject to regulatory and shareholder approval. The Taubman family currently owns around 29 percent of the voting stock and is fully in favor of the merger.
