GGP’s long survival saga continued today when a putative class of shareholders filing a complaint in Delaware Chancery Court to block the completion of a proposed $9.25 billion merger between the embattled REIT and Brookfield Property Partners LP, the real estate unit of Toronto-based Brookfield Asset Management, for a combination of cash and equity.
The shareholders, led by Arthur Susman, who filed the lawsuit on behalf of himself and the others in the group, allege GGP and its board of directors undervalued shares in the company by agreeing on March 26 to be acquired by Brookfield.
The cash-and-stock deal, valued at $9.25 billion, entitles GGP shareholders to elect to receive for each GGP common share, either $23.50 in cash or one unit of Brookfield Property Group stock or one share of a new REIT that will be established once the deal closes.
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In revealing the transaction, Brookfield said the deal is expected to be immediately accretive to funds from operations for Brookfield Property Group shareholders, adding that Brookfield’s per unit distribution would be more than 40 percent higher than the per share GGP shareholders are receiving. Brookfield Property Group’s annual distribution of $1.26 per unit compares with GGP dividend of 88 cents a share.
GGP and the special committee of the board of directors of GGP on March 26 said they had entered into a definitive agreement for Brookfield to acquire all of the outstanding stock of GGP that it didn’t already own — around 66 percent.
Brookfield in November made an initial overture to acquire GGP’s outstanding shares, offering $23 a share or $7.4 billion. Brookfield was rebuffed, but the talks with GGP talks continued, and Brookfield ultimately sweetened the deal.
Founded in 1954 when brothers Martin and Matthew Bucksbaum decided to expand their family’s grocery business and build a shopping center in Cedar Rapids, Iowa, GGP has had a tumultuous history. The company expanded, building and buying malls, and racking up debt. Its biggest acquisition was the 2004 purchase of mall owner Rouse Cos for $14.2 billion.
Brookfield Asset Management took its initial stake in GGP in 2010 when it was chosen to lead the second-largest U.S. mall operator out of bankruptcy in what was the biggest real estate failure in the U.S. at the time. Hedge funds Fairholme Funds and Pershing Square Capital Management agreed to pony up $6.8 billion of new capital to fund the new company. Brookfield acquired additional GGP warrants in January 2013, agreeing to not increase its stake beyond 45 percent for the next four years. In the third quarter, Brookfield exercised all of its outstanding warrants in GGP, bringing its ownership stake to 34 percent.
The deal ended years of speculation about GGP’s fate amid a dip in the mall operator’s share price and earnings, which have been challenged by the growth in e-commerce. GGP stock fell from its mid-2016 five-year high of $31.95, trading on Monday at $20.13 on the New York Stock Exchange.
The is expected to close during the third quarter providing it receives the support of two-thirds of the holders of GGP shares and a majority of the stock not already held by Brookfield.