Simon Property Group Makes Takeover Approaches to Macerich -- Update

By Dana Mattioli, Liz Hoffman and Robbie Whelan 

Simon Property Group Inc. has made takeover approaches for rival Macerich Co., seeking to combine two of the largest shopping-mall owners in the U.S.

The latest approach came within the past few weeks, and followed an earlier one late last year, according to people familiar with the matter. Simon hasn't made a formal offer for Macerich, which has a market value just over $13 billion, according to one of the people.

It isn't clear how receptive Macerich may be to a deal, but in recent weeks the company has been discussing a potential takeover defense with its advisers, some of the people said.

The latest overture comes early in a March window to nominate directors to Macerich's board, which could give Simon a pathway to go hostile should the company rebuff its advances. Still, real estate investment trusts like Macerich are notoriously difficult takeover targets, in part because of various state laws that protect them from unsolicited bids. In Maryland, where Macerich and many other REITs are incorporated, state law affords them antitakeover protections that can slow down hostile suitors and limit their ability to accumulate shares without a board's consent.

Simon in November disclosed a 3.6% stake in Macerich, a move many investors saw as the first step to a takeover bid. The disclosure, which sent Macerich's share price soaring to a multiyear high, came just days after the company struck a deal to buy out Ontario Teachers' Pension Plan's interest in five of its highest-quality malls, for $1.9 billion. Macerich paid for the properties in shares, handing a roughly 11% stake to the Canadian retirement fund.

A combination of Indianapolis-based Simon and Macerich, of Santa Monica, Calif., the country's first- and third-largest mall owners, respectively, could give the companies more clout when negotiating leases with store owners at a time when the industry is grappling with declining foot traffic as more consumers shop online. It could also help Simon expand in the West. Simon has 190 properties and a market value of nearly $60 billion. Macerich has a portfolio of 59 shopping centers concentrated in California and Arizona.

Simon has been an aggressive acquirer of retail properties under its Chairman and Chief Executive David Simon, a hard-charging former investment banker who took over his family's real-estate business in 1995. In 2007, Simon was a partner with hedge fund Farallon Capital Management LLC to buy the Mills Corp., a rival mall operator, for $7.9 billion. In 2012, Simon bought a stake in French retail landlord Klepierre SA, and its European exposure expanded further earlier this year when Klepierre bought Dutch rival Corio NV for $9.7 billion.

Mr. Simon has had his share of rejections too. A 2002 hostile bid for Taubman Centers Inc. was thwarted when the governor of Michigan, where Taubman is based, signed a law aimed at protecting REITs from unwelcome offers. A series of takeover bids starting in 2009 for General Growth Properties Inc., coming out of bankruptcy at the time, failed as well.

Write to Dana Mattioli at [e-mail], Liz Hoffman at [e-mail] and Robbie Whelan at [e-mail]

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