That screaming you hear is David Simon……
Shopping-mall owner General Growth Properties Inc. on Sunday selected as its preferred option for exiting bankruptcy a revised proposal led by Brookfield Asset Management Inc. over a competing offer from rival mall giant Simon Property Group Inc., a person familiar with the matter said.
The decision by General Growth’s board is the latest twist—but perhaps not the final one—in months of competition between the Brookfield group and Simon over which suitor would get the nod to finance General Growth’s bankruptcy exit in exchange for much of the company’s stock. General Growth, which owns 204 U.S. malls, sought bankruptcy protection in April 2009 to restructure its $27 billion of debt and intends to emerge later this year.
The situation may yet change again, as Simon and other investors that it has recruited are expected to review Brookfield’s proposal and perhaps submit another revised bid ahead of a pivotal hearing in the bankruptcy case set for Wednesday. Simon has said it remains interested in acquiring General Growth in its entirety if a deal can be struck.
Still, Simon has pursued General Growth as something of an outsider, given that General Growth has talked with Brookfield about various deals since the months leading up to General Growth’s April 2009 bankruptcy filing. Some in the Simon camp have complained General Growth seems determined not to do a deal with Simon because it is a competitor, though Simon’s recapitalization offer is better than Brookfield’s on some points.
Simon, the largest U.S. mall owner with 321 properties, has pursued General Growth since first suggesting a buyout in an informal meeting with General Growth last August. In February, Simon made a $10 billion buyout offer that General Growth rebuffed in favor of studying other options. Then Simon switched to trying to beat Brookfield’s proposal to help finance General Growth’s bankruptcy exit as a standalone company.
The Brookfield group, which includes General Growth investors Pershing Square Capital Management LP and Fairholme Capital Management, proposed in early April to provide General Growth with $6.5 billion to pay its unsecured debts in exchange for two-thirds of the company’s stock when it exits bankruptcy.
In exchange for its contributions, the Brookfield group required warrants to buy an additional 120 million General Growth shares. The value of those warrants is estimated at $500 million to $900 million.
The Brookfield deal approved Sunday included a few revisions. Brookfield, Pershing and Fairholme will buy General Growth stock at $10.50 rather than the original price of $10, according to a person familiar with the matter.
In addition, some of the warrants will vest over the next seven months. The group will get 60% of the warrants if and when the judge approves the deal, and the remaining 40% will vest between then and Nov. 30.
OK..so if this is accurate, the price is now $15.50 and the warrants are reduced 40% if the BAM group does not end up with the company.
That also means is Simon is serious, they have to come in WELL ABOVE $15.50 since their whole theory of only matching the offer was based on the dilution of the warrants. Since that dilution is now potentially reduced materially, Simon must up his offer proportionally to offset.
More tomorrow as this unfolds….