This is getting pathetic…..As soon as I saw the title I knew who wrote this…
The “reporter”, JOHN JANNARONE has been, well, lets say “advocating” on behalf of the Simon Property Group since well, Simon decided they might want GGP. This is not the first time we have addressed this. It seems the closer the deadline, the more frequent and erroneous the drivel coming from the Mr. Jannarone is…
Here is our previous discussion of it
We have to remember that this is the same “reporter” who only a few months ago chided GGP mgmt regarding the $9 a share offer from Simon saying “General Growth’s board should take the deal rather than rolling the dice again“.
For those not keeping score, GGP shares have appreciated 56% since then.
I, unlike Mr. Jannarone actually own shares. I have a vested interest in the outcome of the proceedings that is best for shareholders. While Mr. Jannarone’s interest may be simply currying favor with SPG mgmt, mine is more visceral, my financial well being. That being said, my problem is not that Mr. Jannarone thinks the SPG offer is the best. It that his “reporting” of the offer has been so transparently one sided since the bidding began to now be virtually irrelevant. I have subscribers on the blog who feel the SPG offer is better. Though I disagree, I respect those opinions as they have weighed the proposals (we have bantered them back and forth) and they have simply come to a different conclusion. Sadly, Mr. Jannarone has not…. in case anyone is wondering, as a “reporter”, he is supposed to.
The only reason we have to give it any credence is because it appears in the WSJ.
I have addressed the concerns with the SPG proposal here countless times. While I appreciate Mr. Jannarone glossing over them (at least he mentioned them this time), the possible FTC issue and Simon perhaps selling $2B-$4B of shares onto the market post deal is material at a minimum. Those are far greater concerns than the $500M-$800M in warrants with a seven year expiration….far, far greater.
At last, the doors to General Growth Properties are about to open. As early as Friday, the mall operator may recommend a bid from Simon Property Group or a consortium led by Brookfield Asset Management to finance its exit from bankruptcy court.
If Simon weren’t GGP’s arch rival, it would be in the catbird seat. Simon has topped Brookfield’s offer by proposing an identical structure but forgoing a package of warrants worth nearly a billion dollars. But GGP, knowing Simon ultimately wants to buy the whole company, is still leaning toward a deal with the consortium that could preserve its independence.
The question is whether GGP shareholders should endure the dilution of the Brookfield consortium’s warrants to keep Simon at bay. GGP doesn’t have to rely solely on price when making a case to the bankruptcy court Tuesday. The preferred bidder needs to have the best bid on the table, not necessarily the highest. Even though Simon has offered to reduce its voting control to just 10%, ties with a rival could interrupt anything from GGP’s hiring plans to expansion. There are also antitrust questions for a Simon bid and a potential share overhang if it has to sell down its stake after a deal.
That said, the Brookfield consortium’s warrants are a heavy financial burden. On top of dilution, the warrants would likely prevent rival bidders from approaching GGP since the offer includes a breakup fee equivalent to their full value.
GGP’s board cannot ignore such concerns. A committee of GGP shareholders, with a say in the decision, has said the warrants are too large. The Brookfield consortium may look close to clinching GGP. But if Brookfield doesn’t reduce its warrant demands, Simon’s proposal may be too sweet to turn down.