Simon bids $10 billion for General Growth Properties

New York City Simon Property Group on Tuesday announced it has offered an unsolicited bid of $10 billion to acquire struggling rival General Growth Properties, which is trying to emerge from bankruptcy protection. The move was not unexpected. Simon had been widely expected to make an offer for General Growth as a way to expand its mall portfolio.

The deal, if accepted by General Growth's board and approved by its creditors and U.S. Bankruptcy Judge Allan Gropper, would combine two of the nation’s largest mall owners into a giant with 550 malls, representing at least a third of the entire U.S. market. Analysts said such dominance would give Simon unrivaled clout in lease negotiations with retailers and in financing talks with its lenders.

In a statement, Simon said that its offer, made a little over a week ago, would accelerate General Growth’s emergence from Chapter 11 protection and would offer creditors a full cash recovery for their holdings.

“Simon is in the unique position of being able to offer General Growth creditors and shareholders full, fair and immediate value,” Simon’s chief executive, David Simon, said in the statement. “Our offer provides much-needed certainty to conclude General Growth’s protracted reorganization process.”

General Growth’s official unsecured creditor’s committee said in Simon’s statement that it is encouraging talks between the two companies.

The offer consists of about $6 a share in cash and about a $3 a share interest in Simon’s master planned community assets. It would offer a $7 billion payout to Simon’s creditors, under which those creditors -- including unsecured bondholders, holders of trust preferred shares and secured lenders -- would receive a full cash recovery for their debt holdings, Simon said.

Indianapolis-based Simon is the largest U.S. public real estate company, and currently owns or has interest in 382 properties worldwide. Chicago-based General Growth owns more than 200 U.S. malls. It sought Chapter 11 bankruptcy protection in April 2009 after failing to refinance portions of its $27 billion debt as they came due.