Why Simon Property Group Acquired Fellow Mall Owner Taubman Centers

The biggest mall owner in the United States has entered into an agreement to purchase its smaller rival for $3.6 billion.

Simon Property Group Inc. announced today that it would snap up 80% of Taubman Realty Group Limited Partnership, which is owned by Taubman Centers Inc. As part of the deal, Simon will acquire Taubman’s stock for $52.50 a share, or a 51% premium over Taubman’s closing price on Friday. And the Taubman family will remain a 20% partner in TRG.

“By joining together, we will enhance the ability of TRG to invest in innovative retail environments that create exciting shopping and entertainment experiences for consumers, immersive opportunities for retailers and substantial new job prospects for local communities,” Simon Property chairman, president and CEO David Simon said in a statement.

Robert Taubman, president and CEO of Taubman, added, “I am proud of all that this company’s talented employees have achieved and am thrilled to have the opportunity to join together with Simon through this joint venture. Over the last few years, David and I have developed an excellent personal relationship, and importantly Simon shares our commitment to serving retailers, shoppers and the communities in which we operate.”

While Taubman owns, manages or leases 26 shopping centers across the U.S. and Asia, Simon Property has more than 200 malls and outlets in the U.S. that feature roughly 3,000 brands.

Last week, Simon Property and mall owner Brookfield Property Partners made a stalking-horse bid to snap up Forever 21, the teen mall staple that filed for bankruptcy protection in September. Together, Simon and Brookfield are Forever 21’s biggest landlords, and the two companies — as well as brand management firm Authentic Brands Group — offered $81.1 million to save the once-$4 billion fast-fashion empire.

Simon had previously hinted at the possibility of investing in more retailers in order to rescue them from going out of business. In the company’s second-quarter earnings call in August, Simon said, “We’re only going to buy into companies that we think have brands and that have the volume that is worth doing it. … We’re certainly as good as the private equity guys when it comes to retail investment.”

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