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GGP: Recent activity

I haven’t blogged about GGP in a while. There have two major updates since the Pershing/Fairholme deal to offer raise capital.

The first is from Simon. Simon is to increase its initial $9 offer to GGP. Representative of Simon meet with GGP executives last week. Also Simon is likely to include Blackstone and two sovereign-wealth funds in the new offer.

Simon is working to come up with a better offer in partnership with private-equity giant Blackstone Group =and two sovereign-wealth funds it hasn’t identified. Simon also is lining up a $6 billion credit line led by J.P. Morgan Chase & Co. to help finance the bid, according to Simon’s letter.

Citigroup Inc. and Morgan Stanley are part of the bank group that J.P. Morgan is leading, according to a person familiar with the matter. It remained unclear exactly how the $6 billion in financing would play into Simon’s new bid.

“There are a number of structural approaches that are under consideration,” said a person familiar with the matter, adding, “There is no shortage of capital to support the deal.”

I have said plenty of times that it would be foolish to count Simon out of the GGP bidding. The GGP assets are top quality and a chance to buy them doesn’t come around often. Simon will have no problem raising the money to buy GGP. The ability to line up JP Morgan, Blackstone, and sovereign wealth funds shows the available funding.

The concern with Simon has been related to FTC clearance on the merger. This is a valid concern. A Simon & GGP marriage would place Simon in an extremely strong competitive position. Simon end up as the number one mall operator with a wide margin. Although I think there are many structural ways to work around the FTC issue. I think Simon can figure out a ways to get the deal structured.

The second piece of news came out tonight. Elliott Management group and Paulson & Co, is in talks with GGP regarding joining the BAM structured deal.

Elliott Management Corp, a major shareholder and creditor of General Growth Properties, is in talks to join Brookfield Asset Management in its plan for the mall owner to exit bankruptcy as an independent company, a source familiar with the discussion said.

The source did not know how much Elliott, a New York-based hedge fund, would contribute to the deal. Elliott owns a significant portion of the 2006 $2.6 billion term and revolving credit facility used by General Growth, the No. 2 U.S. mall owner, which filed for bankruptcy protection in April 2009.

Also, Bloomberg reported that hedge fund Paulson Investment Co is also in talks to join the group.

It is not clear if Paulson Co is working with Elliott Management to come up with a joint offer or if they are working independently. It is also not clear how their involvement will impact the Pershing/Fairholme offer to raise the public capital for the BAM deal.

I would not be surprised if the Elliott Management and Paulson Co talks lead to a better offer for shareholders under the BAM deal. In the BAM/GGP plan to split up GGP into two companies, Pershing & Fairholme made an offer to raise capital needed for the BAM/GGP plan. It is possible that Elliott Management and Paulson Co are working on coming up with a better offer than what see the Pershing/Fairholme offer is. I think in a few days we will get more details on the talk these firms are having.

Shareholders will not have to wait too long to see more details on the Simon /  Elliott Management / Paulson & Co offers. The next 30-60 days will be extremely exciting and rewarding for GGP shareholders. I still believe that the shareholders can gain  quite a bit by GGP emerging as a standalone company. We will know soon what the outcome will be.

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Categories: Updates
  1. March 22, 2010 at 11:49 pm

    Thanks for these updates. Too much noise and speculation related to GGP at the moment but at least you’re displaying the info that counts.

    • parasd
      March 23, 2010 at 9:30 am

      Thanks for the comments. I’ve been a regular subscriber of your blog and have enjoyed the posts.

      GGP has substantive upside, even at current prices. Got to be patient and let the management get the best shareholder value.

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