Taubman Says Simon Still Bound To $3.6B Mall Deal

By McCord Pagan
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Law360 (June 11, 2020, 3:05 PM EDT) -- Mall operator Taubman Centers Inc. said Simon Property Group Inc. can't walk away from their $3.6 billion tie-up and added it will "vigorously" defend itself from the lawsuit seeking to cancel their pre-COVID-19 agreement.

Taubman's statement Wednesday follows Simon's own announcement earlier that day and a lawsuit accusing the Bloomfield Hills, Michigan, business of allowing itself to be damaged by the deadly COVID-19 outbreak to the point where the acquisition of Taubman must be canceled.

"Taubman believes that Simon's purported termination of the merger agreement is invalid and without merit, and that Simon continues to be bound to the transaction in all respects," according to a statement from Taubman.

Taubman said it will enforce its rights under the two companies' contract, including specific performance and monetary damages. The company added that its shareholder meeting to approve the deal remains scheduled for June 25.

"Taubman intends to hold Simon to its obligations under the merger agreement and the agreed transaction, and to vigorously contest Simon's purported termination and legal claims," the company said.

In addition to announcing that the deal is off, Simon sued Taubman Centers Inc. and The Taubman Realty Group Ltd. Partnership in Michigan state court Wednesday. The suit asks the court to find that Taubman has suffered a material adverse effect, or MAE, and has breached covenants in the merger agreement relating to the operation of its business.

MAEs are a standard feature of merger agreements that, in narrowly defined situations, can provide an out for buyers. Although they are not escape hatches for all mergers and acquisitions gone bad, depending on the circumstances they can be a lever that a buyer can pull if market conditions have changed so drastically that a deal doesn't make sense anymore.

According to Simon, the coronavirus pandemic has had a "uniquely material and disproportionate effect on Taubman compared with other participants in the retail real estate industry." Simon says the merger agreement explicitly states that the company could terminate the deal in the event that a pandemic disproportionately harmed Taubman.

Simon said Taubman breached its obligations to closing the deal by failing to take steps to "mitigate the impact of the pandemic as others in the industry have, including by not making essential cuts in operating expenses and capital expenditures."

The deal, inked in February, saw Indiana-based Simon agreeing to buy all of Taubman's common stock for $52.50 per share. The agreement, which was steered by law firms Paul Weiss Rifkind Wharton & Garrison LLP, Latham & Watkins LLP, Wachtell Lipton Rosen & Katz, Honigman and Kirkland & Ellis LLP, would see Simon become an 80% owner of the real estate investment trust's operating subsidiary, Taubman Realty Group.

A representative for Simon declined to comment Thursday and a representative for Taubman did not immediately respond to request for comment.

The case is Simon Property Group Inc. vs. Taubman Centers Inc., case number 2020-181675-CB, in the Circuit Court for the Sixth Judicial Circuit of Oakland County, Michigan.

--Additional reporting by Benjamin Horney and Elise Hansen. Editing by Stephen Berg.

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