Mall Moguls: Brookfield Talks A Sign Of GGP Weakness?

One of the largest publicly traded U.S. shopping mall owners may be going private, according to news from CNBC.

General Growth Properties (GGP) has reportedly held preliminary discussions with Brookfield Property Partners about the possibility of going private, with Brookfield submitting a $14.8 billion bid on Saturday to acquire shares of GGP that it does not already own in a real estate investment trust.

Brookfield Property Partners reportedly offered $23 per share for the remaining shares of GGP, or 66 percent, which it intends to split between cash and equity.

Brookfield CEO Brian Kingston issued a statement indicating that the competitor landlords may be better together.

“Brookfield’s access to large-scale capital and deep operating expertise across multiple real estate sectors, combined with GGP’s high-quality retail asset base, will allow us to maximize the value of these irreplaceable assets,” Kingston said.

Some analysts, however, feel that GGP is pursuing the option out of desperation.

“We believe GGP is negotiating a privatization transaction from a position of weakness,” Wells Fargo Analyst Jeff Donnelly wrote in a note to clients.

It should be noted that these aren’t the first talks between the companies, which were apparently in conversation as far back as 2009, when GGP was seeking bankruptcy protection, and at various points between then and the present.

Others don’t think GGP will take the offer, believing $14.8 billion to be too low a price for 66 percent of the company. Brookfield’s 34 percent stake in the shopping mall owner, taken in 2010 as part of an agreement to bring the REIT (real estate investment trust) out of bankruptcy, is worth about $21 billion.

After the announcement, GGP shares surged 6.7 percent on Monday, exceeding the offer price and suggesting that $23 should really be viewed as a floor for the company’s shares.

Meanwhile, Boenning & Scattergood Analyst Floris van Dijkum noted that Brookfield has a history of raising its offers for takeover candidates. He anticipates a final offer closer to $30 per share.

These analyses suggest that negotiations are still in early stages, and nothing is a done deal.