Simon/Taubman: Revised Deal Reduces Conditionality Along with Price
By now, you’ve probably heard the news that Simon Properties & Taubman Centers have agreed to settle their dispute and move forward with a deal at a purchase price of $43 per share. That’s a pretty substantial haircut from the $52.50 that Simon originally agreed to pay, so what did Taubman get in return?
The press release announcing the deal said that in addition to revising the purchase price, other provisions of the agreement were amended to “reduce closing conditionality.” A review of Taubman’s Form 8-K filing on the terms of the revised deal and the amended and restated merger agreement reveals some of the key changes that the parties negotiated to their original merger agreement in order to enhance deal certainty. These include:
– Amending definition of the term “Material Adverse Effect” contained in Section 9.03 to, among other things, provide a carve-out for “any effect, change, event or occurrence disclosed in any of the [Taubman] SEC Documents filed prior to the date of this Agreement, any written communications delivered by the [Taubman] Parties to the Simon] Parties pursuant to the Original Merger Agreement or referred to in any of the [Simon] Parties’ or the [Taubman] Parties’ filings, written submissions or written correspondence in connection with the Merger Litigation.”
– Tightening Simon’s closing condition in Section 7.02(a) tied to the accuracy of Taubman’s reps and warranties by, among other things, including language providing that this condition won’t apply to “any failure of any representation or warranty of the [Taubman] Parties to be true and correct that was Known to the [Simon] Parties prior to the date of this Agreement (or based on any fact or circumstance Known to the [Simon] Parties prior to the date of this Agreement),” and also excluding any such failure that occurs “primarily as a result of or in connection with exogenous events that were beyond the reasonable control of any of the Taubman Parties.”
– Including a provision in Section 9.10 similar in concept to the one in the LVMH/Tiffany agreement to the effect that, in the event of certain litigation brought prior to the closing to enforce Simon’s obligations under the agreement, the amount of the merger consideration will be the $52.50 per share amount set forth in the original agreement.
Unlike LVMH and Tiffany’s amended deal, this one didn’t originally have a standalone MAE condition. The parties didn’t need to carve out the pandemic from the MAE definition in the revised agreement, because that carve was already contained in the original deal. That feature of the deal is one of the reasons academics and others who write about M&A for a living are disappointed that this case ultimately won’t be litigated. Personally, I’m conflicted — the case would have been great blog fodder, but the deal lawyer in me joins with the parties and their lawyers in their sighs of relief.
As you may recall, Simon’s lawsuit was scheduled for trial this week in a Michigan state court. The parties apparently decided that they’d prefer a more traditional venue in the event they end up in litigation over the revised deal, because Section 9.08 of the revised agreement changes the law governing the agreement from Michigan to Delaware, and provides that the Delaware courts would be the exclusive forum for any litigation arising out of the deal.
-John Jenkins, DealLawyers.com November 17, 2020
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