Unstructured Finance

General Growth battle intensifies

The battle for control of General Growth, owner of shopping centers across America, continues, as it  weighs two rival offers.

General Growth, which is trying to exit bankruptcy, will consider at a board meeting Thursday whether to postpone a key court hearing set for Friday as it continues talks with suitors Simon Property and Brookfied Asset Management.

It has asked Simon to increase its $5.8 billion bid. General Growth may also come back with a new counter0ffer on antitrust issues that could arise from a merger of the two largest U.S. mall owners.

Despite being in bankruptcy since last April after grappling with falling rents and rising vacancies, bidders are keen to take control of the Chicago-based company, which owns a number of malls which generate high cash in posh destinations. 

If shoppers, which fuel America’s economy, return to stores in force, it could turn into a good investment.

Busy week ahead at the mall

General GrowthGeneral Growth has a busy week ahead.

The No. 2 U.S. mall owner is weighing a $5.8 billion takeover bid from its larger rival, Simon Property.

It postponed a hearing in bankruptcy court to Friday to have a ‘stalking horse’ bid approved, which would set the floor for future offers for the company.

General Growth has so far favored a bid led by Brookfield Asset Management to help it exit bankruptcy, choosing it over another offer by Simon to come in as a passive investor and buy a minority stake in the company.

Simon takes fresh tack in bidding battle for bankrupt GGP

Simon Property says it is teaming up with hedge fund Paulson to try to unseat Brookfield Asset Management as the key investor in General Growth Properties as the mall operator angles toward an exit from its bankruptcy.

Simon said it and Paulson would invest $2.5 billion to help General Growth exit bankruptcy, and more importantly, make the investment without taking any warrants to buy shares like Brookfield and other investors have under its current plan, Paritosh Bansal reports.

Paulson, the $32 billion hedge fund run by billionaire investor John Paulson, has made a commitment to co-invest $1 billion with Simon. Sources told us earlier this week that Simon was looking at ways to revise its offer for GGP, which was seen getting hung up on anti-trust concerns.

Simon says … higher bid

BoxingHere’s the latest twist in the General Growth saga: Simon Property says it is weighing a higher bid for its smaller, bankrupt rival and could come up with something within a week.  That’s not surprising.

When General Growth investors Bill Ackman and Fairholme Capital Management stepped up with $3.3 billion of fresh capital to shore up a Brookfield Asset Management-backed plan, Simon lost the edge it had with unsecured creditors. The unsecured creditors stand to get cash under both plans now. And experts said it was too early for Simon to walk away from the game.

For now, Simon is trying to take away General Growth’s excuses for rebuffing its bid.

Bankruptcy no barrier to entry for General Growth stock

There were more than a few quizzical looks in the newsroom this week when General Growth Properties said it would again list its shares on the New York Stock Exchange. Wouldn’t bankruptcy preclude the stock from being on the Big Boad? Not only does being bankrupt not keep your stock from being traded, but from the reaction of investors, it won’t even make your stock a sell.

Ilaina Jonas reports General Growth is not alone as having its shares trade on the Big Board while operating under Chapter 11 bankruptcy protection. A representative of the exchange did not know how many of the approximately 2,425 companies trading on the New York Stock Exchange were in Chapter 11. But a handful, such as W.R. Grace, have continued to trade on the Big Board post-bankruptcy.

General Growth is a bit different, still. It was delisted after its April filing and has now returned. The company has a market capitalization of over $4 billion, making it the 15th-largest publicly traded REIT of nearly 130 REITs traded on the NYSE. About half of General Growth’s shares are owned by hedge fund manager William Ackman of Pershing Square Capital Management and by Chairman John Bucksbaum and his family or family’s trust. Management is still calling the shots, even from bankruptcy, since the pervasive view – though not officially the view of the court yet – is that the company was sent into the tank by the credit crisis and not anything fundamentally wrong with its business. There is even an equity committee taking part in the bankrtupcy proceedings.

DealZone Daily

U.S. mall owner General Growth Properties is looking to raise up to $2 billion from public markets to buy its way out of bankruptcy and fend off an unwanted takeover approach. The U.S. no. 2 is facing pressure to enter talks with market leader Simon Property Group, itself in discussions with Blackstone about the private equity firm co-investing in its bid.

National Australia Bank said it is actively pursuing AXA Asia Pacific, despite concerns the takeover fight for the regional arm of the French Insurer was distracting it and hurting earnings growth. The competition regulator last week raised concerns over an NAB-AXA alliance, bolstering the position of rival AMP.

Meanwhile, AXA Private Equity has entered exclusive talks to buy the private equity assets of investment bank Nataxis, which hopes to sell them for 507 million euros, plus a premium to valuation based on performance.

Simon says: General Growth, negotiate!

You’d think a company in bankruptcy has few weapons with which to defend itself against a predatory buyer. But in the case of bankrupt mall operator General Growth, the tone that would-be salvager Simon Property has taken makes it sound as if the court-protected business has some leverage. That’s because it does.

Late on Wednesday, Simon threatened to walk away from its $10 billion bid if General Growth did not begin talks soon. Chief Executive David Simon accused General Growth of “inappropriately speculating with creditors’ money”. Simon wasted no time getting nasty. It only made its offer to General Growth public the day before.

The offer also came a week before General Growth would have had to apply for a six-month extension period giving it the exclusive right to come up with a plan to emerge from bankruptcy. So where does General Growth’s management get the chutzpah to hold off buyers when creditors have already arrived to claim the company’s assets?

The afternoon deal: Simon says …

GENERALGROWTHSimon Property’s $10 billion offer for General Growth is seen as a pre-emptive strike coming just a week before a bankruptcy court hearing where General Growth was expected to ask for more time to offer its own plan for emerging from bankruptcy, writes Reuters’ Ilaina Jonas and Helen Chernikoff.

Here are some different takes on the deal:

*  “Due to synergies between Simon Property and General Growth, we feel it is unlikely a competitor would be able to bid more than SPG, so we expect that other meaningful bids are unlikely,” Rich Moore, managing director at RBC Capital Markets in Solon, Ohio, in a note to investors. – Bloomberg

*  “Ever since General Growth entered bankruptcy-court protection last year, potential buyers have been circling the mall owner’s premium retail assets,” Michael Corkery writes in the WSJ’s Deal Journal. The blog lists Brookfield Asset Management and Vornado Realty Trust as potential bidders.

Target investors shoot down Ackman


When an activist investor comes to town, it appears that Target security goes on high alert.

While Target had its shareholders, including hedge fund manager William Ackman, and the media fly to one of its yet-unfinished stores outside of Milwaukee to attend their annual meeting, it greeted them with a heavy security detail.

From guards zooming around the parking lot on segway personal transporters to chase down wayward  parkers, to Target employees scanning shareholders with handheld metal dectors when they entered its stores, Target made it very clear it was in no mood for fun and games at its annual meeting.