Simon Makes $10 Billion Bid for General Growth

Guest post from David Bodamer, editor-in-chief, Retail Traffic Magazine

Simon Property Group via a press release made public this morning that just more than a week ago it submitted a formal bid to acquire General Growth Properties for about $10 billion.

General Growth has not yet responded to the release. All indications are that General Growth would like to emerge from Chapter 11 bankruptcy protection as an independent entity. To date it has been extremely successful in restructuring its secured debt. It still, however, has about about $6 billion in unsecured debt that must be restructured. A big chunk of that is believed to be owned by Simon Property Group with Canadian REIT Brookfield Asset Management Inc. owning another big piece of that debt. As unsecured creditors, both firms have the a great deal of power over the fate of the bankrupt entity and can end up owning most of the company in the event of a debt-for-equity swap. In addition, holders of unsecured debt will get to vote when General Growth’s plan for exiting bankruptcy is presented to creditors. For its part, General Growth recently sought to extend the exclusivity period for the filing of its reorganization plan by six months, until the end of August, in part to deal with this debt.

Simon’s offer says that General Growth’s shareholders would get $9.00 per share in the deal. That’s actually lower than where General Growth’s stock is trading in the OTC markets. Indeed, with this announcement the stock will probably jump even higher. Pre-market activity has the stock at $10.60 and counting.

It appears Simon’s play here is to offer unsecured creditors 100 cents on the dollar for the debt they own rather than face any reduction in that amount that General Growth might seek as it continues with its restructuring.

The full text of Simon’s release is below: (more…)