Mall merger: Simon is buying Beverly Center owner Taubman for $3.6 billion

Simon Property Group Inc. agreed to buy rival shopping-mall operator Taubman Centers Inc. for about $3.6 billion, a combination that comes as e-commerce continues to roil brick-and-mortar retail.

Simon — whose California portfolio includes the Brea Mall and several Premium Outlets locations — will pay $52.50 a share in cash for all of Taubman’s common stock, the companies said in a statement Monday. That’s about 51% more than Taubman’s closing price Friday. Simon said it expects to fund the purchase with existing liquidity.

Taubman, which owns the Beverly Center, saw its shares surge 53.2% to $53.12 on Monday. Simon shares rose 1.4%.

Indianapolis-based Simon and Bloomfield Hills, Mich.-based Taubman had been holding on-and-off discussions about a deal since late last year. The agreement comes as a wave of retail bankruptcies have squeezed mall-oriented real estate investment trusts, putting pressure on the industry to consolidate.

With the rise of e-commerce, more Americans are shopping from home, making it harder for brick-and-mortar retailers to survive. That has weighed on malls, which are struggling to boost foot traffic. Although Taubman and Simon have fared better than some competitors during the recent retail turbulence, the shares of both companies have slumped over the last 12 months.

Still, Simon was looking for a way to expand and was attracted to Taubman’s portfolio of mall properties in a bid to boost growth, according to Lindsay Dutch, an analyst at Bloomberg Intelligence.

“There are not many opportunities to grow in the retail landscape,” she said.

The company needs to focus on its U.S. malls, which have been hurt by store closings, and the deal may make room for that, according to Dutch. The purchase makes sense for Simon, given Taubman’s high-quality, well-located malls and Simon’s ability to reinvest in them, she wrote in a report Monday.

The deal would mark the end of family control of Taubman, one of the pioneers of the American mall industry. Founder Alfred Taubman was one of the first developers to capitalize on the explosive growth of America’s suburbs. He built an empire of highly successful upscale regional malls, including the Mall at Short Hills in New Jersey and Woodfield Mall outside Chicago as well as the Beverly Center.

The agreement announced Monday allows the Taubman family to retain an ownership stake in its malls.

Simon has flirted with other acquisitions in recent years. It previously tried to purchase Taubman as well as the shopping center real estate investment trust Macerich Co.

Elsewhere in the industry, there has been consolidation. In 2018, Unibail-Rodamco-Westfield, known as Unibail-Rodamco at the time, acquired shopping-center operator Westfield Corp., and Brookfield Asset Management Inc. bought mall-operator GGP Inc.

Taubman has relatively high exposure to Forever 21, which declared bankruptcy in September. Simon is also a landlord for the retailer and is part of a group trying to buy the chain.

Taubman has faced activist pressure in recent years. Investor Jonathan Litt won a board seat at the company in 2018 after a closely contested proxy fight. He chose not to run for reelection last year.