A Simon Property Group news release outlines why the company is ditching the deal. According to it, Taubman Centers has “suffered a Material Adverse Event” and “breached the covenants” of the agreement.
Simon Property Group states that one of the reason for it ending the deal has to do with the novel coronavirus pandemic. The company says that Taubman Centers was hit particularly hard by the pandemic when compared to other real estate companies.
Adding to this is the Taubman Centers’ response to the coronavirus outbreak. The Simon Property Group news release states that the company didn’t take measures to mitigate damage from the pandemic. That includes “not making essential cuts in operating expenses and capital expenditures.”
Here’s what Simon Property Group has to say about the news.
“The Merger Agreement specifically gave Simon the right to terminate the transaction in the event that a pandemic disproportionately hurt Taubman. 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 Property Group was originally planning to acquire Taubman Centers for $52.50 per share, or $3.6 billion. It’s worth noting that TCO stock was sitting at $45.25 per share when markets closed on Tuesday.
SPG stock was down 4.3% and TCO stock was down 20% as of Wednesday afternoon.
As of this writing, William White did not hold a position in any of the aforementioned securities.