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Simon Property Group and Taubman Centers have struck anagreement under which Simon will acquire an 80% ownership interestin The Taubman Realty Group Limited Partnership in what has beenreported in Marketwatch to be an all-cash deal valued atabout $3.6 billion.

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Simon will acquire all of Taubman common stock for $52.50 pershare in cash and the Taubman family will sell approximatelyone-third of its ownership interest at the transaction price andremain a 20% partner.

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The purchase price represents a 6.2% underwritten capitalizationrate.

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Taubman owns, manages and/or leases 26 super-regional shoppingcenters in the US and Asia, for a total of 25 million squarefeet.

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The two REITs have been holding on-and-off-again mergerdiscussions since late last year, according to sources quoted byBloomberg. Also, this is not the first time Simon hastried to acquire Taubman: in 2002 it attempted a tie up with theREIT. Simon has also tried to use its formidable balance sheet toacquire Macerich and more recently, Forever 21.

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Taubman, like many retail landlords, has been struggling with achanging environment that has seen numerous retail bankruptcies andstore closures, such as Macy's recent announcement.

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Partly as a response, it has sold off other pieces of itsholdings recently. Last December it completed the sale of 50% ofits interest in CityOn.Zhengzhou in Zhengzhou, China to theBlackstone Group for $89 million, retaining a 24.5% ownershipinterest in the center. The REIT received net proceeds of $47.5million. The company also expects to complete the sale of its 50%interest in CityOn.Xi'an, in Xi'an, China to Blackstone in thefirst quarter of 2020. The sale price is $91 million and netproceeds are expected to be about $50 million.

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