Taubman Centers Shareholders Approve Merger with Simon Property Group, Legal Battle Over Deal Continues

Taubman Centers Inc., a developer and owner of luxury shopping malls in Bloomfield Hills, announced Thursday that a majority of its shareholders approved and adopted a previously announced merger agreement with Indianapolis-based Simon Property Group Inc., one of the nation’s largest retail center owners.
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Great Lakes Crossing Outlets
Taubman Centers announced Thursday that a majority of its shareholders approved and adopted a previously announced merger agreement with Simon Property Group Inc. Great Lakes Crossing is one of Taubman’s properties. // Photo courtesy of Great Lakes Crossing Outlets

Taubman Centers Inc., a developer and owner of luxury shopping malls in Bloomfield Hills, announced Thursday that a majority of its shareholders approved and adopted a previously announced merger agreement with Indianapolis-based Simon Property Group Inc., one of the nation’s largest retail center owners.

The merger was announced on Feb. 9, 2020 between Taubman Centers, The Taubman Realty Group Limited Partnership, and related entities, but on June 10 Simon Property Group exercised what it referred to as its contractual rights to terminate the planned merger.

Taubman Centers reported that at a previously scheduled special meeting set for Thursday that approximately 99.7 percent of the shares voted were in favor of the merger agreement, which constitutes approximately 84.7 percent of the outstanding shares entitled to vote.

Shares voting in favor also included approximately 78.3 percent of the outstanding shares entitled to vote held by shareholders other than the members of the Taubman family. The final vote results, as certified by the independent Inspector of Election, were to be filed on a Form 8-K with the U.S. Securities and Exchange Commission.

The shareholder approval, Taubman Centers states, satisfies the final condition precedent to the closing of the transactions (other than those conditions that by their nature are to be satisfied at closing or by Simon). Taubman Centers said it stands ready to close the deal with Simon on June 30, 2020, the third business day following the satisfaction of all conditions precedent, which is the timeline required by the merger agreement.

As previously announced, on June 10, Simon delivered a notice purporting to terminate the merger agreement, and commenced a lawsuit in Michigan in support of its termination.

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.

Taubman Centers said it continues to believe that Simon’s purported termination of the merger agreement is invalid and without merit, and that Simon continues to be bound to the merger agreement and to consummate the transactions.

Taubman also filed an answer and counterclaim in the lawsuit, rejecting Simon’s allegations and seeking specific performance of Simon’s obligations under the merger agreement, including Simon’s obligation to consummate the transactions, as well as other relief.

On June 23, Hon. James M. Alexander for the 6th Circuit Court in Oakland County ordered that discovery was to commence immediately, the case was referred to facilitative mediation to be completed by July 31, the mediation was to be conducted concurrently with all pretrial proceedings and shall not delay or modify any time period to be set in the court’s scheduling order, and that the case shall be trial ready by mid-November 2020. It further ordered that the court will hold a scheduling and status conference on July 31.

Given Simon’s purported termination of the merger agreement and the pending litigation, it appears that Simon will not consummate the deal on June 30, 2020, despite Simon’s contractual obligation to do so, according to Taubman Centers.

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.

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.

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.

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