By Robbie Whelan
David Simon is looking to expand his mall empire by buying
shares of competitor Macerich Co. in what investors are betting is
the first step in a takeover bid.
Indianapolis-based Simon Property Group Inc., the largest U.S.
mall owner, on Wednesday said it had accumulated a 3.6% stake in
Santa Monica, Calif.-based Macerich, the third-largest mall
operator in the U.S.
Simon, a real-estate investment trust, added that it might ask
Macerich to waive a provision that caps individual shareholders'
stakes at 5%, which would allow Simon to boost its position beyond
that.
Shares of Macerich jumped 9.6% to $76.58 in 4 p.m. New York
Stock Exchange composite trading.
Analysts said the move appeared to be the first shot across the
bow in a takeover attempt by Mr. Simon, who serves as chief
executive and chairman of Simon Property Group. Mr. Simon declined
to comment. Spokesmen for Simon Property Group and Macerich
declined to comment.
"I think this is the opening salvo that could potentially lead
to a transaction," said Steve Sakwa, a real-estate analyst at
Evercore ISI. "Most people expect Simon to make an offer for
Macerich at some point."
The move comes just a day after Macerich announced it had paid
$1.9 billion, including the assumption of $673 million in debt, to
purchase the Ontario Teachers' Pension Plan Board's interest in
five of Macerich's highest-quality malls.
Macerich paid for the malls with shares, leaving the Ontario
fund with a 10.9% stake in Macerich. The mall operator waived its
5% share-limit provision to make the transaction possible. The
Ontario fund declined to comment.
Macerich is the last remaining mall REIT with high-quality
assets "that doesn't have a CEO whose last name is the name of the
company, or where management doesn't have a blocking stake," said
Jonathan Miniman, a portfolio manager with CBRE Clarion Securities
in Radnor, Pa., who specializes in REITs.
Mr. Simon has a history of trying to buy competitors. A decade
ago, his company made a $1.68 billion hostile bid for rival Taubman
Centers Inc. that was thwarted only after the governor of Michigan,
where Taubman is based, signed a law to protect REITs from
unwelcome offers.
Starting in 2009, Simon made at least four buyout bids for
General Growth Properties Inc., the nation's second-largest mall
operator, which was then in bankruptcy protection. It dropped its
pursuit after a judge backed a separate plan by another investor to
recapitalize the company.
Meanwhile, Simon has pulled off successful expansions as well.
In 2007, Simon, along with the hedge fund Farallon Capital
Management LLC, paid $7.9 billion, including the assumption of
debt, for Mills Corp., another mall REIT. In 2012, Mr. Simon bought
a hefty stake in French retail landlord Klepierre SA, and it
expanded his reach in Europe earlier this year when Klepierre paid
$9.7 billion for Dutch rival Corio NV.
Macerich owns all or significant stakes in 53 malls across the
country. Some of its highest-quality properties are on the West
Coast and in Arizona, analysts said, making it an attractive target
for Simon, which owns stakes in more than 200 malls and outlet
centers world-wide.
Macerich is controlled by longtime CEO Arthur M. Coppola, who
also serves as chairman of the board. Mr. Miniman, the portfolio
manager, said he met with Mr. Coppola at a conference this month,
and described him as "more invigorated running this company than
I've seen him in a long, long time," but said he wasn't sure how a
potential bid would be received.
"Everything David Simon does has a purpose and sends a message,"
Mr. Miniman said. "I think this is an acknowledgment by another
very high quality mall operator that they see incredible value in
what Macerich has created."
Write to Robbie Whelan at robbie.whelan@wsj.com
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