More thoughts on today’s earlier sub post
We have to go back to May when Simon made an $20 a share offer for GGP. At the time it was rebuffed by GGP and Simon said he was walking away from the possibility of doing a deal for GGP.
This strikes me as a bit of a tantrum…a lot actually. Step back and look at it. We are talking about a $33B deal including debt. Are we really to believe SPG will walk away over a few hundred million?
Remember on Feb. 5th SPG said they were not in active negotiations with GGP only to make an offer 11 days later. A few days after that they threatened to rescind that offer in a huff after it was rejected. When the BAM offer was accepted, SPG had a tantrum then also.
Simon also said the FTC would not be an issue only to then agree to dispose of $15B of properties to alleviate potential FTC issues.
After submitting a “superior” $18.25 final offer, SPG then upped it to $20 in a last minute effort.
Now this….. what is the point? I do not believe for a second David Simon is done with this. He is acting emotionally and childish….goes to show how bad he wants it…
Later we dig through some numbers and posted this:
So the total value of SPG’s last buyout offer was ~$33B. Yet, because of the Judges ruling on Friday, SPG has allegedly pulled out of the bidding for GGP due to the issuance of the warrants. Let’s look at that decision to see if it make a whole lot of sense.
If you remember back to the original deal, Simon said the ultimate value of the warrants was $900M. So as to not be accused of “leaning towards GGP’s numbers, we will take Simon’s estimates at face value.
As of last Friday, Pershing has decided to pass on the issuance of warrants for itself reducing the total issued Friday by 14%. Now we have a total costs of ~$774M.
When we also consider BAM altered the deal to now only receive 40% of its warrants now and another 20% on July when GGP is scheduled to choose a plan to emerge with. That now mean the the actual cost of the warrants as of today is ~$309M.
Are we really to believe that SPG will walk away from the deal over $309M? Really? A chance to both eliminate is largest competitor AND become the clear giant in the industry, all at once and they will pass on this over $309M?
My guess is they sit back, lick their wounds and get over their disappointment. Once that is done they come to the realization of what they are about to let slip through their fingers and begin to chat with GGP behinds the scenes again. There is just no way Simon simply walks away over this….no way
Now we have this from a speech David Simon made last week…
Simon says: ‘Maybe’ to General Growth
David Simon, CEO of the Indy-based shopping mall giant, hinted that the hunt might go on while speaking last week to the Economic Club of Indiana.
When talking about the failed bid for General Growth, he said: “We weren’t successful yet on that.”
A few people laughed.
“I’m glad somebody picked that up,” Simon said, referring to the word “yet.”
Later in the speech, he talked again about the bid.
“What’s interesting is (General Growth is) firing the management, and the two guys they are going with are two guys we’ve worked with a long time,” Simon told the crowd of more than 700.
In May, Simon’s vision of his shopping mall empire expanding by 50 percent in one deal faded after General Growth snubbed the final bid for $33 billion.
Should we take him serious? Yes. Of course he wants to eliminate GGP as a competitor. One would be a fool to think he wouldn’t. The question is …..can he?
Last February when SPG made their initial offer SPG share traded around $77 a share. today those shares sit at $97. That is a sweet $5.8B increase in the value of those shares. SPG’s cash on hand is running roughly equal to 2009 (like GGP their cash grows Q3 and Q4) so we can expect there to be roughly $3- 3.5B sitting there come the end of the year barring any additional deals. According to their latest 10Q SPG has $3.3B on their credit line available and being one of the lesser levered REIT’s, could easily take on more debt to finance a deal. All this assumes they decide not to take on a partner (remember SPG will assume ~$26B in debt if deal is done prior to emergence).
Bottom line? There is plenty there to do a deal. We said this spring if SPG was serious all they had to do was do a stock deal in the $22-$25 range and shareholders would bite. That stock SPG did not want to use then is now worth $5.8B more, sits at a sub 6% cap rate and is a very valuable tool to use for a purchase.
Ball is in David Simon’s court. We all know he wants it so bad he can taste it…..