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CHICAGO-Ignoring a massive bid raise by Simon Property Group at the last minute, locally-based General Growth Properties has instead stuck to its plan to partner with Brookfield Asset Management in its reorganization request. US Bankruptcy Court Juidge Allan Gropper, of the Southern New York District, approved the Brookfield plan in a hearing today.

Simon had offered $20 a share to take over GGP, even though General Growth hasn’t seen that price since late 2008. Since the hearing started at 10 a.m. this morning, GGP’s stock fell from $15.80 per share to a low of $14.

Brookfield pledged to help bring GGP out of bankruptcy by purchasing GGP stock at $10.50 per share, resulting in a $6.5 billion equity investment and $2 billion capital backstop offer, which includes assistance from Pershing Square Capital Management and Fairholme Funds. The Brookfield deal comes with several million dollars in warrant fees to GGP, though Brookfield has agreed to postpone some of the costs.

Simon issued a statement after the hearing was over that it is now out of the entire GGP bankruptcy process. “We are disappointed that the GGP board hastily decided in less than 24 hours to accept substantially less value, rather than take more time to fully assess the benefits of SPG’s offer and enter into negotiations to make this value available to GGP shareholders,” said David Simon, chairman and CEO. “For many months, SPG has tried to work collaboratively and productively with GGP to bring our proposals to fruition. SPG has been highly flexible, making numerous changes to its proposals in response to requests from GGP, its stakeholders and its advisors. GGP’s decision to proceed with a transaction that transfers hundreds of millions of dollars in value to the Brookfield consortium has caused us to conclude that we cannot reach a mutually beneficial transaction with GGP. As a result, it is in SPG’s best interests to withdraw our proposals and decline to participate in the bidding process in the GGP bankruptcy,” Simon said.

Also this morning, William Ackman with Pershing Square, in part to keep GGP from considering the latest Simon offer, agreed to forego its right to receive interim warrants to purchase 17 million shares of GGP as consideration for its stock purchase commitment in support of GGP’s standalone plan of reorganization – in effect, giving up more than $120 million. “For GGP to hand over its keys to its main competitor subject to government approval is reckless in our view. SPG has as much, if not more, to gain from the destruction of General Growth than from its acquisition.”

As a result of the hearing, Brookfield is now a “stalking horse” bidder, meaning that it’s possible a firm or group could make another offer for GGP, but it would have a high climb to beat the Brookfield bid. A General Growth spokesman refused to comment on this story.

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