Simon Property Group Inc., one of the nation’s largest retail center owners, today announced it exercised its contractual rights in an attempt to terminate its Feb. 9, 2020 planned merger agreement with Taubman Centers Inc. in Bloomfield Hills.
Simon also filed an action today in the Circuit Court for the 6th Judicial Circuit of Oakland County against Taubman Centers and The Taubman Realty Group Limited Partnership 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 Centers is an S&P MidCap 400 Real Estate Investment Trust engaged in the ownership, management, and/or leasing of 26 regional, super-regional, and outlet shopping centers in the U.S. and Asia, including Twelve Oaks Mall in Novi and Great Lakes Crossing Outlets in Auburn Hills.
Taubman’s U.S.-owned properties are the most productive in the publicly held U.S. regional mall industry. The company was founded in 1950 by the late A. Alfred Taubman. In 2005, Taubman Asia was established and is headquartered in Hong Kong.
In response, Taubman Centers confirmed that Simon Property Group today delivered a notice purporting to terminate the previously announced agreement and plan of merger among Simon, Taubman, The Taubman Realty Group Limited Partnership, and other parties.
Taubman said it believes that Simon’s purported termination of the merger agreement is invalid and without merit, and that Simon continues to be bound to the transaction in all respects. 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.
Taubman said it 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.
Taubman has also announced that its special meeting of shareholders, at which Taubman shareholders will be asked to approve the merger agreement, remains scheduled for June 25, 2020 at 10:00 A.M. at Taubman’s headquarters in Bloomfield Hills.
As detailed in the complaint, Simon maintains its termination of the merger agreement is based on two separate and independent grounds. First, the COVID-19 pandemic has had a uniquely material and disproportionate effect on Taubman compared with other participants in the retail real estate industry.
Second, in the wake of the pandemic, Simon alleges Taubman has breached its obligations, which are conditions to closing, relating to the operation of its business. 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, according to Simon.
Simon said the merger agreement specifically gave it the right to terminate the transaction in the event that a pandemic disproportionately hurt Taubman. Simon adds Taubman’s significant proportion of enclosed retail properties located in densely populated major metropolitan areas, dependence on both domestic and international tourism at many of its properties, and its focus on high-end shopping have combined to impact Taubman’s business disproportionately due to the COVID-19 pandemic when compared to the rest of the retail real estate industry.
In addition, Taubman has breached its obligation to operate its business in the ordinary course, Simon states.
Simon is a real estate investment trust engaged in the ownership of premier shopping, dining, entertainment, and mixed-use destinations and an S&P 100 company. The company has properties across North America, Europe, and Asia.
In 2002, Simon Property Group and Westfield America attempted a hostile takeover of Taubman Centers, but the deal was withdrawn after Michigan Gov. Jennifer Granholm signed a bill that changed the state’s takeover laws. The battle for Taubman at the time was a bruising battle in which court records showed David Simon, chairman and CEO of Simon Property Group threatened Robert Taubman, president, CEO and chairman of Taubman Centers.