NEW YORK — Simon Property Group’s bid to take over Taubman Centers is getting more hostile.
On Thursday, Simon launched an $18-a-share tender offer, going direct to shareholders after getting rebuffed on its Nov. 13 offer of $17.50 to the board last month. But Taubman urged shareholders to abstain from deciding on the offer. Within 10 business days, as required by securities law, Taubman will issue an official response and also advise shareholders of its position.
It’s a good bet that Taubman opts for its independence. Its chief executive officer, Robert Taubman, has long resisted consolidating in a major way, though mergers have been the trend in the industry recently. Taubman, based in Bloomfield Hills, Mich., owns and/or manages 30 properties. The portfolio includes some of the most upscale malls in the country, including the Mall at Short Hills, in New Jersey, and the Millenia, which opened in Orlando in October.
Simon, based in Indianapolis, is the nation’s largest mall developer and owns or has an interest in 249 properties.
Also on Thursday, Simon said it filed a lawsuit against Taubman, claiming that the Taubman family breached its fiduciary responsibility to shareholders by not giving adequate consideration to Simon’s first bid. The lawsuit also alleges that the Taubman family obtained certain shares improperly without a shareholder vote, thereby enabling Taubman to block any change of control or takeover.
In response, a Taubman spokeswoman said, “While we have not had a chance to review the lawsuit, we believe that Simon’s allegations are entirely without merit and we will vigorously contest.”
“It is important that Taubman’s independent directors establish an arms-length process to ensure that our offer is evaluated on the merits and that the rights of the public shareholders are protected,” Simon Property chief executive David Simon said in a statement.
Simon Property unveiled a $17.50-a-share, $1.46 billion unsolicited takeover bid last month.
The Taubman family controls about one-third of the voting shares of the company.
According to a Banc of America Securities research note written by Lee Schalop and Amy C. deLone, Taubman could pursue one of several strategies to thwart Simon, such as seeking a white night, or selling off various individual properties to other mall landlords to make the overall Taubman package less desirable. Banc of America also raised the possibility that a higher bid from another major mall operator, such as General Growth, Rouse or Westfield, or a fund, emerges. Like the retail industry, the mall industry has gone through much consolidation. In some cases, a couple of players have partnered in taking over other players.
However, according to Banc of America, the most likely scenario is that Taubman just says no to Simon.