"Mall giant Simon Property Group Inc. is readying a sweetened takeover bid for bankrupt rival General Growth Properties Inc. that would top an offer on the table from several General Growth investors.
Simon sent a letter Monday night to General Growth's lawyers saying it expects to deliver its improved proposal late this week or early next. Simon didn't outline details of its offer, which are still in flux, according to people familiar with the matter.
Simon's offer would need to top a recapitalization proposal unveiled earlier this month by property investor Brookfield Asset Management Inc. and General Growth investors Fairholme Capital Management and Pershing Square Capital Management LP. That offer, which would split General Growth into two entities upon emerging from bankruptcy, values the company at $15 per share.It did say in the letter that it will resolve antitrust concerns that may arise from its proposed combination. General Growth, which has more than 200 mall properties, is the nation's No. 2 mall owner, after Simon, which owns 321 U.S. retail properties.
Simon is working to come up with a better offer in partnership with private-equity giantBlackstone Group LP 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."
Whether there is a formal new sweetened offer from SPG or not, we know that $15 will likely hold. Then how about selling the following bull put spread? Specifically,
- Buy to open April $12.50 puts
- Sell to open April $15 puts
The spread can be done for $0.55 to $0.60 net credit as of this writing. It provides 28-31% profit by April expiration. I like the odds.
Good luck!
