Taubman craters 41% after Simon Property Group tries to back out of $3.6 billion acquisition

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Taubman craters 41% after Simon Property Group tries to back out of $3.6 billion acquisition
Reuters / Brendan McDermid
  • Simon Property Group is trying to back out of its proposed acquisition of Taubman Centers after the coronavirus pandemic decimated its business.
  • Taubman Centers, a REIT operator of shopping outlets, saw its shares crater as much as 41% Wednesday morning on the news.
  • Simon Property Group announced its planned acquisition of Taubman on February 10, just one week before the coronavirus pandemic sent the market in a tailspin.
  • Simon says Taubman breached its obligations related to the operation of its business.
  • Visit Business Insider's homepage for more stories.
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Taubman Centers cratered as much as 41% on Wednesday after Simon Property Group announced its plan to terminate its proposed acquisition of the shopping outlet REIT.

Simon Property Group announced its proposed $3.6 billion acquisition of Taubman Centers on February 10, which sent Taubman shares soaring 54% on the news.

But the proposed acquisition was bad timing on Simon's part, as it was just one week before the coronavirus pandemic sent the market into a tailspin, with the S&P 500 index eventually falling nearly 35%.

Read more: Renowned strategist Tom Lee nailed the market's 40% surge from its worst-ever crash. Here are 17 clobbered stocks he recommends for superior returns as the recovery gains steam.

Simon says Taubman breached its contract on two grounds:

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First, that the coronavirus pandemic "had a uniquely material and disproportionate effect on Taubman" relative to other retail REITS, and second, that Taubman "failed 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," Simon said in its the news release.

Simon filed an action in court against Taubman, "requesting a declaration that Taubman has suffered a material adverse event." Simon argued that the initial merger agreement with Taubman gave it the right to terminate the transaction "in the event that a pandemic disproportionately hurt Taubman."

Taubman traded down as much as 41% to $26.70, and Simon Property Group fell as much as 10% to $78 in Wednesday trades.

Taubman craters 41% after Simon Property Group tries to back out of $3.6 billion acquisition
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