General Growth Properties Inc., the second-largest U.S. shopping-mall owner, rejected investor Bill Ackman's call to put itself up for sale and said it plans to remain independent.
"The board has unanimously determined that the best value for all shareholders will be achieved by GGP continuing to execute on its well-conceived business plan," Sandeep Mathrani, General Growth's chief executive officer, said in a letter to Ackman, founder of Pershing Square Capital Management LP. The letter was filed yesterday with the U.S. Securities and Exchange Commission.
Pershing Square, General Growth's No. 2 shareholder, first urged the landlord on Aug. 23 to form a committee to consider selling the company. Ackman said at the time that Simon Property Group Inc. was interested in buying its smaller competitor. General Growth should "initiate negotiations with Simon promptly," he said in a letter filed Aug. 27 with the SEC.
"They have a new management team that's doing very well," Rich Moore, an analyst at RBC Capital Markets in Solon, Ohio, said of General Growth in a telephone interview. He has a sector-perform rating on General Growth shares, the equivalent of a hold. "There's every reason to believe, with the mall business being as good as it is, they'll do quite well over time."
General Growth, which locally owns Oakbrook Center in Oak Brook, Lincolnshire Commons in Lincolnshire and Northbrook Court in Northbrook, as well as Water Tower Place in downtown Chicago, fell 3.6 percent to $19.86 at 10 a.m. New York time. The shares had gained 11 percent from Aug. 22 through yesterday.
General Growth exited bankruptcy protection in November 2010 following a takeover battle between Simon and an investor group that included Pershing Square and Brookfield Asset Management Inc. The mall owner filed for bankruptcy in 2009 after weighing itself down with $27 billion in debt that it was unable to refinance because of the financial crisis and collapse of the commercial mortgage-backed securities market.
An email to Ackman and a telephone message left at his New York office weren't returned yesterday. A message left for Les Morris, a spokesman for Indianapolis-based Simon, also wasn't returned.
General Growth's chairman is J. Bruce Flatt, chief executive officer of Toronto-based Brookfield, which has a stake of about 42 percent in Chicago-based General Growth. Ackman said last month that Brookfield had also expressed interest in taking over the mall owner. Following Ackman's disclosure, Brookfield said it wasn't trying to buy General Growth nor did it want to sell its stake in the company.
"We agree with the position unanimously taken by GGP's board to have GGP continue to execute on its business plan," Flatt said yesterday in a letter to General Growth's board and shareholders. "GGP is currently performing extremely well and we believe GGP is positioned for superior growth over the next five years versus any comparable retail mall investment."
Tenant sales and occupancies are rising at General Growth's malls, which include Fashion Show in Las Vegas. Company revenue rose to $624.1 million in the second quarter, up 3.5 percent from a year earlier, according to an Aug. 1 statement. Funds from operations, which gauge a property company's ability to generate cash, rose 10 percent to $102.2 million.
Simon had discussed paying 0.1765 of a Simon share for each General Growth share, according to Ackman. That would value General Growth at $27.57 a share, based on Simon's closing price yesterday.
That would have given General Growth a higher per-share value than Simon's proposed takeover from more than two years ago. Simon said in May 2010 that it offered $20 a share for its competitor, which was under bankruptcy protection at the time.
General Growth owns or has stakes in 149 regional shopping malls with about 141 million square feet (13 million square meters) of leasable space in the U.S. and Brazil.