BLOOMFIELD HILLS, MI—Taubman Centers is pushing back against Simon Property’s declaration that their $3.6 billion merger is terminated.

Taubman says that Simon’s “purported” termination of the merger agreement is invalid and without merit, and that “Simon continues to be bound to the transaction in all respects.”

The REIT also said that it intends to hold Simon to its obligations under the merger agreement and it will vigorously contest Simon’s purported termination and legal claims. “Taubman intends to pursue its remedies to enforce its contractual rights under the merger agreement, including, among other things, the right to specific performance and the right to monetary damages, including damages based on the deal price,” it said in an announcement.

Taubman has also announced that its Special Meeting of Shareholders, at which Taubman shareholders will be asked to approve the merger agreement, remains scheduled for June 25.

Will This Deal Be Recut?

There is a likelihood that this deal will be re-cut rather than fall apart, writes Haendel St. Juste of Mizuho Securities.

Yesterday’s stock market activity also points to such an outcome. St. Juste noted that Taubman shares fell precipitously after the announcement and then stabilized (for now) in the low-to-mid-$30s “which implies a 50/50 probability of close.”

That said, it can’t be completely ruled out the third outcome—that the court compels Simon to close the merger at the agreed price, he continued in his post, noting that Simon has no financing contingency in its agreement.

“As for Taubman, the potential outcomes appear more favorable—a potential win in Michigan court supporting either the completion of the deal at the agreed-upon price… or a “win” that allows Simon to exit the merger but pays Taubman fees for non-performance, should Taubman prevail, as we, the investors and legal experts we’ve talked to currently believe they would.”

Under the deal Simon was to acquire an 80% ownership interest in Taubman for cash, buying all of Taubman common stock for $52.50 per share. The Taubman family was to sell one-third of its ownership interest at the transaction price and remain a 20% partner.

In yesterday’s announcement, Simon said it was terminating the agreement because Taubman has suffered disproportionately from the pandemic compared with its peers and because it didn’t fulfill the requirements of the merger agreement.