Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On February 9, 2020, Taubman Centers, Inc., a Michigan corporation ("TCO" or the
"Company"), The Taubman Realty Group Limited Partnership, a Delaware limited
partnership (the "Taubman Operating Partnership" and, together with TCO, the
"Taubman Parties"), 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") and 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"), 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 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 Surviving Taubman Operating Partnership) of
the outstanding interests of 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").
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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%
. . .
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As previously disclosed in a Current Report on Form 8-K filed by the Company on
December 13, 2017, the Company adopted the Taubman Severance Plan for Senior
Level Management (the "2017 Severance Plan"), which expired in accordance with
its terms on December 11, 2019. The description of the 2017 Severance Plan set
forth in such Form 8-K filed on December 13, 2017 is incorporated herein by
reference. On February 9, 2020, TCO reinstated the 2017 Severance Plan,
effective on such date, in substantially the same form as the 2017 Severance
Plan. The foregoing description is qualified in its entirety by the reinstated
2017 Severance Plan, a copy of which is attached hereto as Exhibit 10.1 and
which is incorporated herein by reference.
Item 8.01 Other Events.
Concurrent with and as a condition to the Simon Parties entering into the Merger
Agreement, each member of the Taubman Family that owns TCO Common Stock, TCO
Series B Preferred Stock or partnership units of the Taubman Operating
Partnership (such equity interests, collectively, the "Subject Equity"),
including certain affiliated entities of Robert S. Taubman and William S.
Taubman and certain members of their immediate family, entered into a voting
agreement with Simon (the "Voting Agreement") with respect to all of the Subject
Equity beneficially owned by the Taubman Family.
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The Taubman Family beneficially own approximately 90% of the outstanding shares
of TCO Series B Preferred Stock, representing, together with TCO Common Stock
beneficially owned by the Taubman Family, approximately 29% of the voting stock
of TCO. Pursuant to the Voting Agreement, the Taubman Family have agreed to take
the following actions, among others, during the term of the Voting Agreement:
(1) vote the Subject Equity in favor of the REIT Merger, the Partnership Merger
and the Conversion, as applicable; (2) vote the Subject Equity against any
Acquisition Proposal; and (3) vote the Subject Equity against any other actions
that would impede, interfere with, delay or prevent the consummation of the
Mergers, the Conversion or the other transactions contemplated by the Merger
Agreement. The Voting Agreement will terminate upon the earliest of (i) the
termination of the Merger Agreement in accordance with its terms; (ii) the REIT
Merger Effective Time; and (iii) the Taubman Family providing written notice to
Simon that it is terminating the Voting Agreement at any time following (A) a
Taubman Board Recommendation Change or (B) any change to the terms of the Merger
Agreement that reduces the amount or changes the form of consideration payable
to the Taubman Family or is otherwise materially adverse to the Taubman Family.
The foregoing description of the Voting Agreement does not purport to be
complete, and is qualified in its entirety by reference to the full text of the
Voting Agreement. A copy of the Voting Agreement entered into by the Taubman
Family, Simon and the Simon Operating Partnership is attached hereto as Exhibit
99.1 and is incorporated herein by reference.
In addition, Robert S. Taubman has agreed with TCO to cooperate with the Special
Committee of the TCO Board (the "Taubman Special Committee") in his capacity as
a director and officer to facilitate the Go-Shop Process. Mr. Taubman has agreed
to negotiate in good faith (on behalf of the Taubman Family) with a competing
bidder that has made a proposal which the Taubman Special Committee determines
is a Superior Proposal, or is reasonably likely to lead to a Superior Proposal,
and that has a structure similar to the transactions with Simon. Mr. Taubman has
also agreed to discuss in good faith with the Taubman Special Committee terms on
which the Taubman Family might be willing to agree to an alternative transaction
that does not have a structure similar to the transactions with Simon.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Description
2.1 * Agreement and Plan of Merger, dated as of February 9, 2020, by and
among the Taubman Parties and the Simon Parties
10.1 Taubman Severance Plan for Senior Level Management
99.1 Voting Agreement, dated as of February 9, 2020, by and among Simon,
Simon Operating Partnership and the other parties thereto
104 104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
* 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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FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
reflect management's current views with respect to future events and financial
performance. Forward-looking statements can be identified by words such as
"will", "may", "could", "expect", "anticipate", "believes", "intends", "should",
"plans", "estimates", "approximate", "guidance" and similar expressions in this
Current Report on Form 8-K that predict or indicate future events and trends and
that do not report historical matters. The forward-looking statements included
in this Current Report on Form 8-K are made as of the date hereof. Except as
required by law, the Company assumes no obligation to update these
forward-looking statements, even if new information becomes available in the
future. Actual results may differ materially from those expected because of
various risks and uncertainties, including the occurrence of any event, change
or other circumstances that could give rise to the termination of the merger
agreement? the inability to complete the proposed transaction due to the failure
to obtain shareholder approval for the proposed transaction or the failure to
satisfy other conditions to completion of the proposed merger? risks related to
disruption of management's attention from the Company's ongoing business
operations due to the proposed transaction? the effect of the announcement of
the proposed transaction on the Company's relationships with its tenants,
operating results and business generally; general economic conditions, and other
factors. Such factors include, but are not limited to: changes in market rental
rates; unscheduled closings or bankruptcies of tenants; relationships with
anchor tenants; trends in the retail industry; challenges with department
stores; changes in consumer shopping behavior; the liquidity of real estate
investments; the Company's ability to comply with debt covenants; the
availability and terms of financings; changes in market rates of interest and
foreign exchange rates for foreign currencies; changes in value of investments
in foreign entities; the ability to hedge interest rate and currency risk; risks
related to acquiring, developing, expanding, leasing and managing properties;
competitors gaining economies of scale through M&A and consolidation activity;
changes in value of investments in foreign entities; risks related to joint
venture properties; insurance costs and coverage; security breaches that could
impact the Company's information technology, infrastructure or personal data;
costs associated with response to technology breaches; the loss of key
management personnel; shareholder activism costs and related diversion of
management time; terrorist activities; maintaining the Company's status as a
real estate investment trust; changes in the laws of states, localities, and
foreign jurisdictions that may increase taxes on the Company's operations; and
changes in global, national, regional and/or local economic and geopolitical
climates.
You should review the Company's filings with the Securities and Exchange
Commission, including "Risk Factors" in its most recent Annual Report on Form
10-K and subsequent quarterly reports, for a discussion of such risks and
uncertainties.
IMPORTANT INFORMATION ABOUT THE TRANSACTION AND WHERE TO FIND IT
In connection with the proposed transaction between the Company and Simon, the
Company will file with the U.S. Securities and Exchange Commission (the "SEC") a
Proxy Statement of the Company (the "Proxy Statement"). The Company plans to
mail to its shareholders the definitive Proxy Statement in connection with the
proposed transaction. This Current Report on Form 8-K is not intended to and
does not constitute the solicitation of any proxy, vote or approval. INVESTORS
AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY STATEMENT AND
OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AS THEY
BECOME AVAILABLE BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY,
SIMON, THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security
holders will be able to obtain free copies of the Proxy Statement and other
documents (when available) filed with the SEC by the Company through the website
maintained by the SEC at www.sec.gov. In addition, investors and security
holders will be able to obtain free copies of the documents filed with the SEC
by the Company in the Investor Relations section of the Company's website at
http://investors.taubman.com/investors or by contacting Erik Wright, Manager,
Investor Relations at ewright@taubman.com or (248) 258-7390.
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PARTICIPANTS IN THE SOLICITATION
The Company and certain of its directors, executive officers and employees may
be considered participants in the solicitation of proxies in connection with the
solicitation of proxies from shareholders of the Company in favor of the
proposed transaction. Information regarding the persons who may, under the rules
of the SEC, be deemed participants in the solicitation of the shareholders of
the Company in connection with the proposed transaction, including a description
of their respective direct or indirect interests, by security holdings or
otherwise, will be included in the Proxy Statement described above filed with
the SEC. Additional information regarding the Company's directors and executive
officers is also included in the Company's proxy statement for its 2019 Annual
Meeting of Shareholders, which was filed with the SEC on April 30, 2019, and its
Annual Report on Form 10-K for the year ended December 31, 2018, which was filed
with the SEC on February 28, 2019. These documents are available free of charge
as described above.
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