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Simon Property Group Inc SPG

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Simon Announces Taubman Merger Is Back on, but at an 18% Discount to Prior Price Tag

Kevin Brown Equity Analyst

Analyst Note

| Kevin Brown |

Simon Property Group announced that they have modified and re-entered into a definitive agreement to acquire 80% of Taubman Centers. Simon originally announced the merger back in February at $52.50 per share for a total consideration of $3.6 billion. However, with the market downturn following the outbreak of the coronavirus, Simon pulled out of the deal in June as management sought to renegotiate the price. The management teams of Simon and Taubman have agreed upon a new price of $43 per share or 18% below the prior per share price, which values the Taubman Centers owns 26 high-quality retail properties at just under $3 billion. Taubman's portfolio of Class A malls is heavily reliant on international and domestic tourism, so we believe that COVID-19 has had a greater negative impact on Taubman's Class A malls than Simon's Class A malls. Still, the lower price offsets Simon taking on the near-term weakness and benefits the long-term value provided by the merger. We view the overall deal as a modest positive for Simon's bottom line, leading us to reaffirm our $152 fair value estimate for the no-moat company.

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Company Profile

Business Description

Simon Property Group is the second- largest real estate investment trust in the United States. Its portfolio includes an interest in 207 properties: 106 traditional malls, 69 premium outlets, 14 Mills centers (a combination of a traditional mall, outlet center, and big-box retailers), four lifestyle centers, and 14 other retail properties. Simon's portfolio averaged $693 in sales per square foot over the past 12 months. The company also owns a 21% interest in Klepierre, a European retail company with investments in shopping centers in 16 countries, and joint venture interests in 29 premium outlets across 11 countries.

225 West Washington Street
Indianapolis, IN, 46204
T +1 317 636-1600
Sector Real Estate
Industry REIT - Retail
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 4,500