Brookfield takes control of America’s second biggest mall owner in deal worth $15.3 billion

Commercial real estate company Brookfield Property Partners LP said on Monday it would acquire the 66 per cent of GGP Inc that it does not already own in a cash-and-stock deal that values GGP, the second-largest U.S. mall owner and operator at about US$15.3 billion.

The deal comes as many malls struggle to retain tenants amid the brick-and-mortar retail sector’s downturn. The acquisition will strengthen Brookfield Property’s negotiating power with retailers and allow it to repurpose some GGP properties.

“Having Brookfield’s expertise in offices, hotels and multi-family residential properties will allow the combined company to draw more value from the GGP mall assets,” Brookfield Property Chief Executive Brian Kingston told Reuters in an interview.

The agreement comes four months after a special board committee of GGP rejected a US$14.8 billion cash-and-stock offer from Brookfield Property as inadequate.

Brookfield Property, which is also a major owner of U.S. office properties, is currently GGP’s largest shareholder with a 34 per cent stake.

Under Brookfield Property’s latest offer, which was first reported by Reuters earlier this month, GGP shareholders can elect to receive US$23.50 in cash per share, or either one Brookfield unit or one newly created share that trades as a real estate investment trust (REIT). GGP shares ended trading on Monday at US$21.21.

The complex deal structure is the result of a compromise between Brookfield Property, which wanted to continue to trade as a publicly listed partnership, and GGP’s special committee, which wanted GGP shareholders to continue to own a REIT security, if they so choose.

The cash consideration in the deal was increased by US$1.85 billion to US$9.25 billion. Instead of a 50/50 split under Brookfield Property’s previous offer, cash now represents 61 per cent of the total deal.

With about 127 “Class A” high-end mall properties, mostly in the United States, GGP’s tenants include carmaker Tesla Inc , jeweller Tiffany & Co and retailer Macy’s Inc .

It is not the first time Brookfield Property’s attempt to take over a REIT in which it already owns a big stake was rejected, only for it to subsequently succeed.

In 2016, Rouse Properties Inc, another U.S. mall owner, rejected an offer by Brookfield Property, its largest shareholder. It eventually agreed to a sweetened US$2.8 billion offer.

Goldman Sachs Group Inc served as financial adviser and Simpson Thacher & Bartlett LLP served as legal counsel to GGP’s special committee. Citigroup Inc served as financial adviser and Sullivan & Cromwell LLP served as legal counsel to GGP. Weil, Gotshal & Manges LLP, Goodwin Procter LLP and Torys LLP served as legal counsel to Brookfield Property.

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