Published 19 February 2010
Troubled US mall owner General Growth Properties Inc has told competitor Simon Property Group Inc it will stick to its programme of restructuring itself out of chapter 11 bankruptcy protection and won’t pre-empt that in favour of a Simon takeover bid.
Simon timed the release of a letter outlining its bid for a few hours before General Growth was due to make a foreshadowed statement on its restructure.
General Growth chief executive Adam Metz thanked Simon chairman David Simon for “your indication of interest” but said his board had concluded” it is not sufficient to pre-empt the process we are undertaking to explore all avenues to emerge from chapter 11 and maximise value for all the company’s stakeholders…..
“As we indicated during our meeting, we are about to commence a process to explore several potential options for the company’s emergence from chapter 11, including a sale of the entire company as you have proposed as well as a capital raise. The company & its advisors have been working over the past several months to prepare the company to launch this process.”
In response, Mr Simon wrote: “Given the clear risks of pursuing an alternative plan, the current state of the retail industry and your company’s past history of risky financial choices, your lack of urgency should deeply concern creditors & shareholders. Time is passing and General Growth is inappropriately speculating with creditors’ money – the company’s high leverage means not only that equity value could be destroyed by relatively small market movements, but that the value of the unsecured debt is also at risk. Accordingly, it is not surprising that the official committee of General Growth’s unsecured creditors has publicly stated that it supports our offer and encourages you to engage with us promptly to allow our offer to be considered by your creditors & shareholders.
“We have tried for many months to explore a transaction with you that would give creditors & shareholders an attractive & expeditious exit from your bankruptcy process and have been repeatedly put off. Time & again, serious engagement with us has been pushed off into some indefinite future when you might start to begin to commence a ‘process.’”
Simon made a $US10 billion-plus bid, including about $US9 billion in cash.
General Growth, the second-biggest US-owned mall owner, filed for chapter 11 bankruptcy protection in April 2009 for itself and for 166 subsidiaries – most of the individual mall-owning companies in the group, including The Rouse Co and the Howard Hughes Corp.
The group’s 2008 year-end balance sheet showed it had total assets of $US29.6 billion and total debts of $US27.3 billion. Its share price had fallen from $US40 in early 2008 to $US1.05 when it sought bankruptcy protection.
The Simon offer would deliver more than $US9/share to general Growth shareholders, consisting of $6/share in cash and a distribution of General Growth’s ownership interest in the masterplanned community assets, which General Growth valued at more than $US3/share.
17 February 2010: Simon bids for bankrupt General Growth
Want to comment? Go to the forum.
Attribution: Simon release, General Growth website, story written by Bob Dey for the Bob Dey Property Report.