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Pisani: Simon Property's General Growth Bid is HUGE

Simon Property Group bid for General Growth: a BIG DEAL. How big?

Too big to pass up. A once in a lifetime opportunity to buy high-quality assets.

How big? One of the biggest property deals in U.S. history, likely.

Simon controls about 15 percent of the malls in the U.S., according to Bank of America.

General Growth controls about 14 percent.

We are talking about a deal where one company would control 30 percent of the mall space in the U.S. What does Simon get? Control of some of the finest malls in the country. Lots more negotiating power with retailers.

Oh, retail is dead, you say? We’re overmalled, we’re all going to shop online? Don’t believe all that. Several retailers have already discussed plans for new openings this year…and you can bet with a moderate recovery in the economy, we will see fresh new retail ideas emerging in 2010. (See below for insights from Consumer Nation blog.)

Where are they getting the cash? It's a $10 billion bid (see my prior note for details)...almost all of it in cash.

They have about $4 billion in cash, so they still need to come up with another $5 billion. Where to get it from? They talked about joint ventures with institutional investor partners, and indeed some kind of 50/50 joint venture may well emerge. Would they issue more common shares? Probably.

Will another bidder come in? There are other big players who have been raising money for acquisitions — Brookfield Asset Management, for example — but $10 billion is a tough nut to crack.

Simon has a lot of experience buying big assets (from people like Mills Corp and DeBartolo), but this dwarfs everything they — and anyone else — has done.

Will it go through? They have the backing of the unsecured creditors...interestingly, GGWPQ (that Q means in bankruptcy, folks) is trading at $11.50, quite a premium to the roughly $9 bid that was made.

It means the Street is expecting Simon to up its offer, or another bid to come in.

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More on Retail from 'Consumer Nation':

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Other Big Players:

Taubman Centers

Vornado Realty Trust

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CNBC Data Pages:

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Questions? Comments? tradertalk@cnbc.com

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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