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Simon weighs new General Growth bid, sources say

In this May 5, 2005 file photo, shoppers circulate through the Fashion Valley Mall, a Simon Property Group mall, in San Diego.  (AP Photo/Lenny Ignelzi, File)

In this May 5, 2005 file photo, shoppers circulate through the Fashion Valley Mall, a Simon Property Group mall, in San Diego. Simon is considering raising its $10 billion buyout offer for rival shopping mall owner General Growth Properties Inc., which owns three malls in Wisconsin. (AP Photo/Lenny Ignelzi, File)

By Alex Veiga
AP Business Writer

Los Angeles — Simon Property Group Inc. is considering raising its $10 billion buyout offer for rival shopping mall owner General Growth Properties Inc. as early as this week, two people familiar with the matter said.

Simon sent a letter to General Growth this week saying it anticipates boosting its offer above that of a proposal put forth by General Growth and three of its largest stakeholders, the people said on condition of anonymity because they were not authorized to discuss the matter publicly.

That means a new Simon offer would have to value General Growth above $15 a share. Simon’s initial offer valued the Chicago-based company at about $9 a share.

General Growth, the nation’s second-largest shopping mall operator, owns or manages 200 malls in 44 states. In Wisconsin, the company owns Fox River Mall in Appleton, Oakwood Mall in Eau Claire and Mayfair Mall in Wauwatosa.

General Growth sought shelter from creditors last April. It was the largest real estate bankruptcy in U.S. history.

Despite being in bankruptcy protection for nearly a year, it finds itself in the unusual position of courting buyout offers that promise to pay off creditors in full and give shareholders a premium over the current stock price.

Indianapolis-based Simon went public last month with its bid for General Growth, but it was rebuffed.

General Growth is looking for a higher offer and has put forward a plan to exit bankruptcy with an investment from Canadian property manager Brookfield Asset Management Inc., Fairholme Capital Management, one of its largest unsecured creditors, and Pershing Square Capital Management, one of its largest shareholders.

General Growth is expected to seek approval from the bankruptcy court in coming weeks to designate the Brookfield-Fairholme-Pershing proposal as a stalking-horse bidder as it solicits other buyout offers. A stalking-horse bid is an initial offer for a bankrupt company’s assets.

General Growth also plans to ask the court to approve so-called bid protections that would compensate the investor group should General Growth sell the company to another bidder. The company has previously outlined compensating the stalking-horse bidder with warrants to buy 60 million shares of General Growth at an exercise price of $15 a share.

U.S. Bankruptcy Judge Allan Gropper in New York has tentatively set April 13 to hear the request.

In its letter this week, Simon noted that it will likely not participate in the bidding process beyond that date, should the court approve bid protections and effectively raise the costs to acquire General Growth, the people said.

A Simon spokesman declined to comment.

A call to a General Growth spokesman was not immediately returned.

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