June 10, 2020 / 2:51 PM / 2 months ago

Mall operator Simon Property abandons $3.6 billion acquisition of Taubman

FILE PHOTO: Shoppers ascend and descend escalators at the King of Prussia Mall, owned by Simon Property Group, United State's largest retail shopping space, in King of Prussia, Pennsylvania, U.S., December 8, 2018. Picture taken December 8, 2018. REUTERS/Mark Makela

(Reuters) - Simon Property Group Inc (SPG.N), the biggest U.S. mall operator, said on Wednesday it was ending its $3.6-billion deal to buy Taubman Centers Inc (TCO.N), citing the beating the retail sector has taken during the COVID-19 pandemic.

Simon Property said that the coronavirus outbreak “disproportionately hurt” Taubman’s malls because they are located in densely populated metropolitan areas, depend on tourism and feature high-end retailers whose sales have shrunk.

Simon Property, which runs shopping destinations such as the Woodbury Common Premium Outlets, in New York, also said that Taubman did not cut costs to mitigate the impact of the pandemic.

There are no discussions about renegotiating the transaction at a lower valuation, a person familiar with the matter said.

Taubman said that it would fight against Simon’s termination of the deal and that the move was without merit. Taubman, whose properties include the Mall at Short Hills in New Jersey, also said it would pursue monetary damages based on the deal price against Simon.

Shares of Taubman and Simon pared losses Wednesday afternoon. Taubman’s shares dropped 19% to $36.48 and Simon shares dropped roughly 3% to $85.

The terminated agreement follows a string of other broken deals.

Last month, private equity firm Sycamore Partners ended its $525-million deal to acquire lingerie brand Victoria’s Secret from L Brands Inc (LB.N), while Japanese telecommunications conglomerate SoftBank Group Corp (9984.T) dropped its agreement to fund a $3-billion tender offer for co-working company WeWork.

The combination of the two mall owners was announced in February. The growth of online shopping had already slashed foot traffic at brick-and-mortar retail stores, and the pandemic has accelerated that trend.

Reporting by Jessica DiNapoli in New York, Aishwarya Venugopal in Bengaluru; Editing by Maju Samuel, David Gregorio and Nick Zieminski

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