Simon Dumps Taubman, But Taubman Still in Love Amid Retail Mall Merger Dispute

Shopping mall titans Simon Property Group Inc. and Taubman Centers Inc. were all set to tie the knot before COVID-19 decimated commerce. Now the two can’t agree on their future.

Simon said earlier this month it wants out of the deal, which was announced in February, not long before the COVID-19 outbreak ballooned. The company wanted to terminate the proposed merger for two reasons, according to a press release from Simon. The first reason cited the “uniquely material and disproportionate effect” the pandemic had on Taubman. The second was that Taubman breached its obligations under their merger agreement.

Taubman, in turn, shot back at Simon, saying Simon’s breakup attempt “is invalid and without merit.”

“Taubman intends to hold Simon to its obligations under the Merger Agreement and the agreed transaction, and to vigorously contest Simon’s purported termination and legal claims,” the company said in a press release issued the same day, June 10, as Simon published its Dear John letter.

So where does that leave things—will they or won’t they get hitched/? Taubman’s stock price appears to be the deciding factor.

When Simon announced the proposed merger in February, it agreed to acquire an 80% ownership interest in Taubman for cash, buying all of Taubman common stock for $52.50 per share. The stock’s 50 day simple moving average, as of mid-June, hewed closer to $41 per share.

Simon did not explicitly mention stock price in its cancellation announcement. It did, however, allege Taubman dropped the ball on how it confronted the coronavirus from a corporate standpoint.

“In particular, Taubman has failed to take steps to mitigate the impact of the pandemic as others in the industry have, including by not making essential cuts in operating expenses and capital expenditures,” Simon said.

Whether they can renegotiate the terms of the sale remains to be seen. Analysts cited by S&P Global Market Intelligence predict it will go forward.

They won’t get there without more public maneuvering. Simon says it filed a lawsuit in Michigan against Taubman “requesting a declaration that Taubman has suffered a Material Adverse Event (‘MAE’) under the Merger Agreement and has breached the covenants in the Merger Agreement governing the operation of Taubman’s business.” Taubman says its shareholders will be asked June 25 to approve the merger as originally set forth. It also hints at taking legal action of its own.

“Taubman intends to pursue its remedies to enforce its contractual rights under the Merger Agreement, including, among other things, the right to specific performance and the right to monetary damages, including damages based on the deal price,” the company said.

Other deals in commercial real estate dried up when the pandemic spread around the globe, but the ice may be beginning to break. Though the U.S. officially entered a recession, government restrictions on business activity began to lift, and the May jobs report came in rosier than expected.