Simon Property Group, the largest U.S. mall owner, announced that it has exercised its contractual right to terminate its February 9, 2020 merger agreement with high-end mall owner Taubman Centers. Simon argues that Taubman has breached its obligations specifically by not taking steps “to mitigate the impact of the pandemic as others in the industry have.”
Simon also filed an action in the Circuit Court for the 6th Judicial Circuit of Oakland County, Michigan against Taubman Centers, Inc. and The Taubman Realty Group Limited Partnership requesting a declaration that Taubman has suffered a Material Adverse Event (MAE) under the Merger Agreement and has breached the covenants in the Merger Agreement governing the operation of Taubman’s business.
In a statement, Simon said its termination of the Merger Agreement “is based on two separate and independent grounds. First, COVID-19 has had a uniquely material and disproportionate effect on Taubman compared with other participants in the retail real estate industry. Second, in the wake of the pandemic, Taubman has breached its obligations, which are conditions to closing, relating to the operation of its business. In particular, Taubman has 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.
“The Merger Agreement specifically gave Simon the right to terminate the transaction in the event that a pandemic disproportionately hurt Taubman. Taubman’s significant proportion of enclosed retail properties located in densely populated major metropolitan areas, dependence on both domestic and international tourism at many of its properties, and its focus on high-end shopping, have combined to impact Taubman’s business disproportionately due to COVID-19 when compared to the rest of the retail real estate industry. In addition, Taubman has breached its obligation to operate its business in the ordinary course.”
In response, Taubman said in a separate statement, “Taubman believes that Simon’s purported termination of the Merger Agreement is invalid and without merit and that Simon continues to be bound to the transaction in all respects. Taubman intends to hold Simon to its obligations under the Merger Agreement and the agreed transaction and to vigorously contest Simon’s purported termination and legal claims. Taubman intends to pursue its remedies to enforce its contractual rights under the Merger Agreement including, among other things, the right to specific performance and the right to monetary damages including damages based on the deal price.”
Photo courtesy Simon Property Group
