Taubman Centers to Be Bought by Simon Property for $3.6 Billion

Simon Property Group, the biggest U.S. mall owner, will lay out $52.50 cash a share, or $3.6 billion, for Taubman Centers.
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Taubman Centers'  (TCO) - Get Report shares rocketed after it agreed to be bought by the largest U.S. mall owner, Simon Property Group  (SPG) - Get Report, for $52.50 cash a share, or $3.6 billion.

Both real estate investment trusts have suffered from the explosive growth of e-commerce, which has kept shoppers at home rather than heading to local malls.

Despite their struggles, many analysts view Simon Property, Indianapolis, and Taubman Centers, Bloomfield Hills, Mich., as the two strongest operators in the mall REIT space. 

Simon's market capitalization is $43 billion. Taubman’s is $2 billion, but it owns premier properties with high-end stores, analysts say.

The deal price reflects a premium of more 51% over Taubman’s closing share price on Friday. The Taubman family will retain a 20% stake.

Simon said it won’t need to take on debt to make the purchase. The two companies have been holding intermittent talks for a deal since late last year.

Mall REITs have hit the skids over the past five years, as their tenant stores have withered, with brands like Sears  (SHLDQ)  and JC Penney  (JCP) - Get Report shuttering many locations.

Simon Property should benefit from the deal, Bloomberg Intelligence analyst Lindsay Dutch told the company’s news service. That’s because Taubman has high-quality, well-located malls, and Simon can invest to improve them, she said.

At last check Taubman’s shares traded at $53.05, up 53%. The stock on Jan. 31 had touched a 52-week low above $26. Its 52-week high, set last April, was $54.50. 

Simon traded at $141.49, up 0.3%.

The author owns shares of Simon Property Group.