Simon Property Group Inc (NYSE:SPG) has shelved its bid to buy Macerich Co. after Macerich rejected an offer of $23.2 billion to buy the company. The deal would have been the largest of its kind in America had it gone through.
The deal has been described by Simon Property as “best and final offer”. However, Macerich, led by CEO Arthur Coppola, decided that the deal undervalued the company. Initially, the bid was of $91 per share. However, Simon Property increased it to $95.50, yet it did not lead to merger negotiations.
The share market did not take the news well, and Macerich’s stock was trading 5.5% lower at $79.67 on Wednesday. Simon Property had earlier offered $95.5 per share.
Markets responded negatively to the deal not going through. This may mean that the company might have to explain its decision to not going ahead with the deal to its shareholders. According to analysts, Macerigh will have to step up its performance dramatically to pacify investors. The analysts also noted that the company’s targets were overly ambitious.
Macerich said that it would sell its lower growth properties and set targets to increase its margins by 4% over the next two years.
Analysts though believe that Macerich did not do the right thing by thwarting the buyout attempt. They also have shown scepticism at plans of Macerich to increase its profitability.
Simon Property Group Inc (NYSE:SPG) had earlier tried to buy out general Growth Property Inc, currently the number two mall owner in America.
A buyout would have increased Simon Property’s high-end mall portfolio and allowed it to get better lease deals, given that people are shifting online for their shopping needs.
James Sullivan, an analyst at Cowen & Company, stated that Simon Property could look to Europe to increase its market share and perhaps increase its stake in Klepierre. The deal would make sense due to weakness in Euro and very favourable long-term financing according to Sullivan.