Simon's Hostile Tender for Taubman

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The Taubman Company is one of the preeminent retail developers/owners/managers in the United States and its properties among the most productive in the nation. Simon is the largest shopping center owner and manager in the country and was interested in Taubman because Taubman, a much smaller company, has among the most unique, profitable and high-quality shopping centers in the country. It was much easier to buy a shopping center company than to develop shopping centers from the ground up, which is really why Simon was interested in Taubman. Thus, Simon Property Group launched a hostile tender offer for Taubman Centers. This was a hostile bid because Taubman was not for sale and, therefore, a negotiated transaction was not possible. So Simon made an effort to acquire Taubman, notwithstanding the fact that Taubman's board of directors was not selling the company. This case discusses issues of Real Estate Investment Trust (REIT) valuation, financial policy, and corporate governance, as Robert Taubman and his company's independent directors must decide whether to accept the $20 per share offer and, if not, what other action to take.

1) As a Taubman Centers, Inc. independent director, would you vote to accept the $20 per share offer? Why or why not? What alternative courses of action would you consider? As independent directors of Taubman Centers, we would counter the offer with a mixed cash and equity offer at the $20 price. A deal closer to 50% of the value being all cash and the other 50% being equity in the parent company (Simon) is more beneficial in this case. Such a deal allows current shareholders upfront returns as well as potential long term value. A per share price of $20 represents a significant premium over the current price of $14.50. Receiving equity in the parent company gives investors the opportunity long term capital gains and dividend income (if any). Additionally, avoiding a hostile shareholder targeted...
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