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Simon gives General Growth revised offer
NEW YORK |
NEW YORK (Reuters) - Simon Property Group Inc (SPG.N) gave General Growth Properties Inc (GGP.N) a revised recapitalization offer ahead of a presentation before its rival's board on Thursday.
The revised offer delivered to General Growth late on Wednesday features a group of new investors putting in $1.1 billion of capital alongside the largest U.S. mall owner.
These investors are ING Clarion Real Estate Securities, Oak Hill Advisors, RREEF and Taconic Capital Advisors, Simon said. Simon also already has a commitment from hedge fund Paulson & Co for another $1 billion.
Simon is also now asking for two General Growth board seats as part of the deal, down from three earlier, sources familiar with the situation said. General had asked for the reduction, one of these sources told Reuters earlier.
Simon Chief Executive David Simon is expected to travel to Chicago to be at the General Growth board meeting, several sources said.
Simon would make a pitch to persuade General Growth's board to choose it over Brookfield Asset Management Inc (BAMa.TO) as the key investor in a plan to exit bankruptcy protection.
General Growth has already submitted an exit proposal bankrolled by Brookfield and two other investors and Brookfield said on Monday it would not raise its offer.
Simon's meeting with the General Growth board comes on the same day as a court deadline to object to the Brookfield-backed offer and just a week ahead of a hearing on that plan.
General Growth and the investors were not immediately available for comment. The sources declined to be identified because the discussions are not public.
The two sides already have been in talks over Simon's offer to invest $2.5 billion in General Growth in exchange for roughly a quarter of the company, two of the sources said.
The discussions have been around ways in which General Growth could potentially endorse the Simon recapitalization proposal on modified terms, these sources said.
Talks have centered around governance issues and structure of a Simon investment rather than price, these sources said. Simon has offered to buy 250 million General Growth shares at $10 each.
Paulson has been linked to a U.S. Securities and Exchange Commission lawsuit against Goldman Sachs Group (GS.N). Paulson has not been accused of any wrongdoing.
In doing its due diligence on Simon's offer, General Growth was expected to ask more questions about the implications of the case, according to one of the sources.
Under the terms of its offer, Brookfield stands to get three seats on General Growth's board. Brookfield plans to name its executives -- CEO Bruce Flatt, Senior Managing Partner Cyrus Madon and Brookfield Properties Corp (BPO.TO) CEO Richard Clark -- should it succeed in its bid.
"We haven't made any determination at this stage, but we expect that those three executives would be board representatives," Brookfield spokeswoman Katherine Vyse said.
Under General Growth's current plan, it would see a $6.55 billion cash infusion from Brookfield and investors Fairholme Capital Management and William Ackman's Pershing Square Capital.
That offer includes the three capital sources receiving warrants to buy 120 million shares, with Brookfield getting half of them.
Simon, whose initial offer to take over all of General Growth was rebuffed, has countered with an offer to replace all these investors without any warrants. It has not abandoned its plans to make a new run for the entire company either.
Brookfield has no plans to change its demand for the warrant protection, Flatt wrote in a letter Monday to General Growth.
"We are not prepared to move forward with our commitment unless we are granted the warrants," Flatt wrote.
Representatives of the heirs of Howard Hughes, who became General Growth's creditors when the mall owner bought Rouse Cos in 2004, have filed an objection aimed specifically at the warrants.
The Hughes heirs said in court papers last week the value of the warrants likely exceeds $884 million, much higher than the $519 million under General Growth's calculations.
General Growth shares closed up 1.6 percent at $15.42 and were up 3 percent at $15.90 after hours, while Simon was up 2.8 percent at $86.99, both on the New York Stock Exchange.
(Additional reporting by Pawel Jordan in Toronto; editing by Robert MacMillan, Bernard Orr and Andre Grenon)
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