Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On February 9, 2020, Simon Property Group, Inc., a Delaware corporation
("Simon"), Simon Property Group, L.P., a Delaware limited partnership (the
"Simon Operating Partnership"), Silver Merger Sub 1, LLC, a Delaware limited
liability company and wholly owned subsidiary of the Simon Operating Partnership
("Merger Sub 1"), Silver Merger Sub 2, LLC, a Delaware limited liability company
and wholly owned subsidiary of Merger Sub 1 ("Merger Sub 2" and, together with
Simon, the Simon Operating Partnership and Merger Sub 1, the "Simon Parties"),
Taubman Centers, Inc., a Michigan corporation ("TCO"), and The Taubman Realty
Group Limited Partnership, a Delaware limited partnership (the "Taubman
Operating Partnership" and, together with TCO, the "Taubman Parties"), entered
into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which,
subject to the satisfaction or waiver of certain conditions, Merger Sub 2 will
be merged with and into the Taubman Operating Partnership (the "Partnership
Merger") and TCO will be merged with and into Merger Sub 1 (the "REIT Merger"
and, together with the Partnership Merger, the "Mergers"). Upon completion of
the Partnership Merger, the Taubman Operating Partnership will survive (the
"Surviving Taubman Operating Partnership") and the separate existence of Merger
Sub 2 will cease. Upon completion of the REIT Merger, Merger Sub 1 will survive
("Surviving TCO") and the separate corporate existence of TCO will cease.
Immediately following the Partnership Merger, the Surviving Taubman Operating
Partnership will be converted (the "Conversion") into a Delaware limited
liability company (the "Joint Venture").
Transaction Structure
At the effective time of the Partnership Merger (the "Partnership Merger
Effective Time"), (i) each unit of partnership interest in the Taubman Operating
Partnership (each, a "Taubman OP Unit") issued and outstanding immediately prior
to the Partnership Merger Effective Time held by a limited partner of the
Taubman Operating Partnership who is not a member of the Taubman Family (defined
as the "Titanium Family" in the Merger Agreement) (the "Minority Partners") will
be converted into the right to receive, at the election of such Minority
Partner, the Common Stock Merger Consideration (as defined below) or 0.3814
limited partnership units in the Simon Operating Partnership; (ii) certain
Taubman OP Units issued and outstanding immediately prior to the Partnership
Merger Effective Time held by a member of the Taubman Family will remain
outstanding as units of partnership interest in the Surviving Taubman Operating
Partnership; and (iii) all other Taubman OP Units issued and outstanding
immediately prior to the Partnership Merger Effective Time held by a member of
the Taubman Family will be converted into the right to receive the Common Stock
Merger Consideration. In addition, at the Partnership Merger Effective Time,
each outstanding incentive unit in the Taubman Operating Partnership will vest
and be converted into a Taubman OP Unit, to be treated in the Partnership Merger
in the same manner as the Taubman OP Units held by the Minority Partners. The
membership interests of Merger Sub 2 issued and outstanding immediately prior to
the Partnership Merger Effective Time will automatically be converted into a
number of units of partnership interest in the Surviving Taubman Operating
Partnership such that following the Partnership Merger, Merger Sub 1 and TCO
will collectively own 80% (assuming, for purposes of this calculation, that the
Taubman OP Units issuable under the Option Deferral Agreement (as defined in the
Merger Agreement) among TCO, the Taubman Operating Partnership and Robert S.
Taubman are outstanding interests of the Surviving Taubman Operating
Partnership) of the outstanding interests of the Surviving Taubman Operating
Partnership.
Pursuant to the terms and conditions in the Merger Agreement, at the effective
time of the REIT Merger (the "REIT Merger Effective Time"), (i) each share of
common stock, $0.01 par value per share, of TCO (the "TCO Common Stock") issued
and outstanding immediately prior to the REIT Merger Effective Time will be
converted into the right to receive $52.50 in cash (the "Common Stock Merger
Consideration"); and (ii) each share of Series B Non-Participating Convertible
Preferred Stock, $0.001 par value per share, of TCO (the "TCO Series B Preferred
Stock") will be converted into the right to receive an amount in cash equal to
the Common Stock Merger Consideration, divided by 14,000. Immediately prior to
the REIT Merger Effective Time, TCO will issue a redemption notice and cause
funds to be set aside to pay the redemption price for each share of Series J
Cumulative Redeemable Preferred Stock, no par value, of TCO (the "TCO Series J
Preferred Stock") and each share of Series K Cumulative Redeemable Preferred
Stock, no par value, of TCO (the "TCO Series K Preferred Stock"), at their
respective liquidation preference of $25.00 plus all accumulated and unpaid
dividends to, but not including, the redemption date of such share (the
"Redemption").
In addition, at the REIT Merger Effective Time, (i) each outstanding restricted
stock unit award of TCO (each, a "TCO RSU") and each outstanding performance
stock unit award (each, a "TCO PSU") granted under the Taubman Stock Plans
(defined as the "Titanium Stock Plans" in the Merger Agreement) that vest in
accordance with its terms in connection with the closing of the Mergers will
automatically convert into the right to receive the Common Stock Merger
Consideration; (ii) each outstanding TCO RSU and TCO PSU that is not eligible to
vest in accordance with its terms at the REIT Merger Effective Time will be
converted into a cash substitute award to be paid (A) with respect to any such
award granted prior to 2020, in accordance with the same service-vesting
schedule that applied to the original TCO RSU or TCO PSU award and (B) with
respect to any such award granted in 2020, in accordance with the same vesting
schedule (including performance-vesting conditions) that applied to the original
TCO RSU or TCO PSU award; (iii) each outstanding share of deferred TCO Common
Stock (each, a "TCO DSU") granted under the Taubman Stock Plans will be
converted into the right to receive the Common Stock Merger Consideration; and
(iv) each dividend equivalent right granted in tandem with any TCO RSU or TCO
PSU (each a "TCO DER") will be treated in the same manner as the outstanding TCO
RSU or TCO PSU to which such TCO DER relates.
Finally, at the effective time of the Conversion, the Option Deferral Agreement
(as defined in the Merger Agreement) will be deemed to be amended so that each
Option Deferred Unit (as defined in the Merger Agreement) will represent the
right to receive, following the Conversion, one Reorganized Taubman OP Unit
(defined as a "Reorganized Titanium OP Unit" in the Merger Agreement), and will
remain subject to all other terms and conditions of the Option Deferral
Agreement.
Following the Mergers and the Conversion, the Simon Operating Partnership will
own 100% of the outstanding equity of Surviving TCO, Surviving TCO will own 80%
of the limited liability company interests of the Joint Venture, and the Taubman
Family will own the remaining 20% (assuming, for purposes of this calculation,
that Taubman OP Units issuable under the Option Deferral Agreement are
outstanding interests of the Surviving Taubman Operating Partnership) of the
limited liability company interests of the Joint Venture. Surviving TCO and the
Taubman Family will enter into an Operating Agreement (as defined below) with
respect to the Joint Venture at the time of the Conversion in the form attached
as Exhibit B to the Merger Agreement and described further below.
Conditions to the Merger
The consummation of the Mergers is subject to the approval of the REIT Merger by
(i) the holders of at least two-thirds of the outstanding shares of TCO Common
Stock and TCO Series B Preferred Stock (voting together as a single class); (ii)
the holders of at least a majority of TCO Series B Preferred Stock; and (iii)
the holders of at least a majority of the outstanding shares of TCO Common Stock
and TCO Series B Preferred Stock (voting together as a single class and
excluding the outstanding shares of TCO Common Stock and TCO Series B Preferred
Stock owned of record or beneficially by the Taubman Family). In addition, the
consummation of the Mergers is subject to certain other customary closing
conditions, including, among others, the approval of the Partnership Merger by
the partners holding at least a majority of the aggregate percentage interests
in the Taubman Operating Partnership (other than those held by TCO) (which
approval has been obtained), the absence of certain legal impediments to the
consummation of the Mergers, the absence of a Material Adverse Effect (as
defined in the Merger Agreement) with respect to TCO and material compliance by
the Simon Parties and the Taubman Parties with their respective obligations
under the Merger Agreement. The obligations of the parties to consummate the
Mergers are not subject to any financing condition or the receipt of any
financing by the Simon Parties.
Go-Shop; Non-Solicit
For the first 45 days following the signing of the Merger Agreement (the
"Go-Shop Period"), TCO will be permitted to solicit, propose, encourage or
facilitate competing bids and negotiate competing Acquisition Proposals (as
defined in the Merger Agreement), subject to certain information and matching
rights of Simon. Subject to certain exceptions, at the conclusion of the Go-Shop
Period, TCO has agreed not to (i) solicit, initiate or propose the making or
submission of, or knowingly encourage or facilitate the making or submission of,
any offer or proposal that constitutes or would reasonably be expected to lead
to an Acquisition Proposal; (ii) furnish to any person access to the business,
properties, assets, books, records or other non-public information, or to any
personnel, of TCO or any of its subsidiaries, in any such case with the intent
to induce the making or submission of, or to knowingly encourage, facilitate or
assist, an Acquisition Proposal; (iii) participate, facilitate or engage in
discussions or negotiations with any person with respect to an Acquisition
Proposal or any offer, proposal or inquiry that would reasonably be expected to
lead to an Acquisition Proposal; (iv) enter into any letter of intent,
memorandum of understanding, agreement in principle, investment agreement,
merger agreement, acquisition agreement or other contract relating to an
Acquisition Transaction (as defined in the Merger Agreement) or that would
reasonably be expected to lead to an Acquisition Proposal; or (v) reimburse or
agree to reimburse the expenses of any other person in connection with an
Acquisition Proposal or any inquiry, discussion, offer or request that would
reasonably be expected to lead to an Acquisition Proposal.
Prior to the approval of the Merger Agreement by TCO's shareholders, the Board
of Directors of TCO (the "TCO Board") may in certain circumstances effect a
Taubman Board Recommendation Change (defined as a "Titanium Board Recommendation
Change" in the Merger Agreement) and terminate the Merger Agreement in order to
enter into a definitive agreement providing for a Superior Proposal (as defined
in the Merger Agreement), subject to complying with certain notice and other
specified conditions set forth in the Merger Agreement, including payment to
Simon of a termination fee (as described below).
Termination
Upon a termination of the Merger Agreement, under certain circumstances, the
Taubman Operating Partnership will be required to pay a termination fee to Simon
of $46,604,909 if such termination occurs during the Go-Shop Period (and for a
limited period beyond the Go-Shop Period in certain cases, as described in the
Merger Agreement) and $111,851,783 if such termination occurs after the
conclusion of the Go-Shop Period. The termination fee is payable if the Merger
Agreement is terminated by TCO prior to the approval of the Merger Agreement by
TCO's shareholders to accept a Superior Proposal, as further described in the
Merger Agreement. In addition, the termination fee is payable to Simon if Simon
terminates the Merger Agreement under certain circumstances and subject to
certain restrictions, including if the TCO Board effects a Taubman Board
Recommendation Change. If (i) the Merger Agreement is terminated (A) by either
TCO or Simon because the Mergers have not occurred by the end date described
below or because TCO shareholder approval is not obtained at a shareholder
meeting duly held for such purpose or (B) by Simon in respect of a breach of
TCO's covenants or agreements that would give rise to the failure of a closing
condition that is incapable of being cured within the time periods prescribed by
the Merger Agreement; (ii) an alternative acquisition proposal has been made to
TCO and publicly announced or otherwise disclosed and not withdrawn; and (iii)
within twelve months after termination of the Merger Agreement, TCO enters into
a definitive agreement with respect to an alternative acquisition proposal (and
subsequently consummates such transaction) or consummates a transaction with
respect to an alternative acquisition proposal, the Taubman Operating
Partnership will pay Simon the termination fee.
In addition to the foregoing termination rights and customary termination rights
held by each party, either party may terminate the Merger Agreement if the
Mergers are not consummated on or before an end date of February 9, 2021 and
such party's breach was not the primary cause of the failure of the Mergers to
be consummated by such date. In such event, no termination fee is payable.
Other Terms of the Merger Agreement
The Simon Parties and Taubman Parties each made certain customary
representations, warranties and covenants in the Merger Agreement, including,
among others, covenants by the Taubman Parties to use commercially reasonable
efforts to conduct its business in all material respects in the ordinary course
of business consistent with past practice, subject to certain exceptions, and a
covenant by Simon to maintain its REIT qualification, during the period between
the execution of the Merger Agreement and the consummation of the Mergers.
Further, each party has agreed to use its reasonable best efforts to obtain any
. . .
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
2.1* Agreement and Plan of Merger, dated as of February 9, 2020, by and
among the Taubman Parties and the Simon Parties.
99.1 Voting Agreement, dated as of February 9, 2020, by and among Simon,
the Simon Operating Partnership and the other parties thereto.
104 The cover page from this Current Report on Form 8-K formatted in Inline
XBRL (included as Exhibit 104)
* Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished
to the SEC upon request.
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