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CHICAGO-As GlobeSt.com reported Tuesday, Indianapolis-based Simon Property Group has made a $10-billion offer to acquire locally-based General Growth Properties. This move will merge the top two retail-focused companies in the country, creating a company with more than 520 assets.

However, this is not a done deal, according to Ryan Thomas, a partner at Bass Berry & Sims PLC and expert in mergers and acquisitions of public and private companies. Since GGP is still trying to pull a number of assets out of bankruptcy, Simon will need court approval; as well as the approval of secured creditors and shareholders.

The creditors may be the easiest challenge. “The court will balance the interests of all creditors, including the secured creditors, and will consider the feasibility of the Simon transaction,” Thomas tells GlobeSt.com. “The secured creditors may support the transaction, unless they see an alternate path that enhances their collateral–or unless the Simon transaction somehow impairs their collateral.”

The shareholders and board, on the other hand are likely to be more of a test. It is not out of the realm of possibility that the board could reject the offer if they feel Simon is “bottom feeding when the stock is undervalued.”

“The shareholders and the board will likely be a challenge for Simon, especially given the apparent cold shoulder to date,” Thomas says. “One of General Growth’s largest equity holders, (Pershing Square) who happens to be an activist investor, has recently indicated that the company is vastly undervalued–placing its valuation significantly higher than the offer by Simon. It is also telling that the board has apparently not engaged in negotiations with Simon, presumably reflecting either a more optimistic view of the residual value of the equity or confidence in a better alternative plan.”

Reports from Tuesday indicate Pershing Square believes GGP is worth $24 to $43 per share. The Simon offer comes to $9.00 per General Growth share, a total of “$6.00 per share in cash and all of GGP’s ownership interests in the [Master Planned Community] assets,” according to Simon’s offer letter.

This significant difference in perceived value, could lead other companies, such as Brookfield Asset Management, to make a competitive bid at a higher price. A consortium of bidders is also a possibility, as that will allow a number of companies to come together and offer a larger purchase price than they could individually.

Thomas says, “It is possible Pershing Square will run a PR campaign and use other leverage it can generate to encourage Simon to sweeten the pot–particularly given their obviously more bullish view of the company’s asset values. Given Pershing’s already significant stake, it only needs to convince a few significant institutional allies to hold out with it for additional consideration.”

With the reality of competition, Thomas says, Simon is likely to be holding back to have some leveraging power. “Simon is likely holding back some powder and not showing all its cards yet.”

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