Tuesday, December 8, 2009

Simon buys Prime. Is that all there is?

John Reeder has a good blog post on the Simon acquisition of Prime Outlets. I agree with his thoughts on market timing. I think buying before market bottom is fine as long as the numbers work. And Simon obviously believes that.

If I recall, Simon had billions of dry powder. This is an 80% cash deal, so there is money left for other acquisitions. While valued at $2.33 billion, Simon is only paying ~$560MM cash and assuming debt and preferred stock obligations.

Todd Sullivan says that antitrust problems may have played a role with multiple bidders and that Simon is out, with Brookfield the main player now. His story also says Brookfield would go the JV route with GGP, which is much more palatable to management. Makes some sense. And Brookfield has also apparently become a "meaningful creditor" of GGP. (I believe Simon also owns some GGP debt.)

Simon may or may not be out, Brookfield may or may not be in the lead, and I would still not be stunned if someone else in the business -- or outside it -- wasn't sniffing around a little, too, under the radar screen. (I will open my prediction envelope once a deal is announced.)