US shopping mall operator Simon Property Group has terminated its plans of acquiring its high-end mall rival Taubman Centers. The company announced on Wednesday that it is exercising its contractual rights to prematurely end the deal, citing the recent economic downturn caused by the coronavirus pandemic as the main reason for its decision.
On Wednesday afternoon, Taubman released a statement confirming Simon Property's decision. Taubman added that the sudden termination of the transaction was "invalid and without merit." The Michigan-based company alleged that Simon Property was still bound to the transaction and it is prepared to hold the company to its obligations.
Taubman stated that it plans to contest Simon Property's termination of the agreement and that it is prepared to utilize appropriate legal remedies, including claiming monetary damages. Possible compensations will be calculated based on the $3.6 billion price tag of the would-be transaction. The company added that it will be holding a shareholder's meeting on June 25 to further discuss the matter.
Simon Property's termination of the deal comes just days after it had filed a lawsuit against clothing retailer GAP over its unpaid rent. The decision highlights the company's struggles amid the lingering economic backlash of the pandemic, which has caused massive financial stress to both landlords and tenants.
In a press release, Simon Property claims that the agreed-upon merger deal specifically cited the company's right to terminate the transaction if it finds that the pandemic had "disproportionately hurt" Taubman's operations. According to Simon Property, the recent spread of the pandemic had severely hurt Taubman's business, which relies heavily on international tourism and high-end shopping.
The company added that Taubman's business had been impacted disproportionately compared to the rest of the industry. Simon Property further reasoned that Taubman was guilty of breaching its obligations of taking the necessary steps to mitigate the impact of the pandemic on its operations similar to what other players in the industry had done.
Simon Property and Taubman originally reached an agreement to merge on February 10, roughly a month after the pandemic had hit the US. The deal for Simon Property to acquire Taubman was estimated to be worth around $3.6 billion.
Simon Property had agreed to purchase all of Taubman's stock for $52.50 per share, or roughly 51 percent above the company's share prices during that time. As of Tuesday this week, Taubman's share prices have tumbled to $45.25 per share, significantly lower than the price when the agreement was first reached.
