General Growth Properties (NYSE:
GGP) announced Mar. 8 that a joint venture between Pershing Square Capital Management and Fairholme Capital Management said they would commit $3.925 billion of new equity capital, at a value of $15.00 per share, to facilitate GGP's emergence from bankruptcy.
Both Fairholme and Pershing are among GGP's largest unsecured creditors. Pershing, owned by General Growth board member William Ackman, accumulated an estimated 25% share of the company by acquiring shares for less than $2 a piece at the end of 2008. However, in connection with this proposal, Ackman has resigned from GGP's board.
The group said this offer could be paired with the previously-announced $2.625 billion proposal from Brookfield Asset Management, for a combined $6.5 billion of committed equity capital. "The Company believes that this combined equity capital along with its anticipated new $1.5 billion debt issuance - or the reinstatement of a comparable amount of existing debt - would, if accepted, deliver substantially all of the cash required to fulfill the Company's capital needs in connection with its emergence from bankruptcy and provide unsecured creditors with par plus accrued interest in cash," said General Growth.
Under terms of the Fairholme - Pershing proposal, $3.8 billion would be used to purchase shares of GGP stock at $10.00 per share, and $125 million would be used to backstop the remaining portion of a $250 million rights offering by General Growth Opportunities, a new company that would own GGP's land and redevelopment candidate properties, at a price of $5.00 per share. These terms line up closely with Brookfield's offer, which involved investing $2.5 billion at $10.00 per share for new GGP common stock and up to $125 million in General Growth Opportunities at $5.00 per share.
To date, Simon Property Group has maintained its $10 billion offer to acquire General Growth. Under terms of that deal, GGP shareholders would receive $6.00 per share in cash, plus a $3.00 per share distribution from GGP for the company's master planned community division. Simon's offer includes the pay-off of $7 billion in claims owed to GGP's creditors, bond and note holders. GGP shareholders and creditors would be given the option to receive the payouts or convert it to Simon common stock.
Updated Mar. 11, 2010:
According to
Reuters, Simon Property Group CEO, David Simon, said at real estate conference in New York that the Fairholme - Pershing Square offer, in combination with the Brookfield offer, eliminates some of the uncertainty that existed in the Brookfield plan on its own, but not all uncertainty. Regardless, Simon said the new plan would not put pressure on his company to sweeten its existing $10 billion offer.
Updated Mar. 17, 2010:
According to the Wall Street Journal, Simon sent a letter to General Growth's lawyers saying it plans to deliver a higher offer to the company late this week or early next week. Expect the new offer to ease some antitrust concerns that have risen, said Simon.
Follow these links for CoStar's coverage to date: