2 Mall Operators Agree to Merge in $3-Billion Deal
Simon Property Group agreed Tuesday to acquire DeBartolo Realty Co. in a deal worth about $3 billion that would combine two prominent American companies whose founding families were pioneers in the development of suburban shopping malls.
Simon Property’s proposed purchase of DeBartolo Realty would create a real estate giant, with 183 regional and community shopping centers in 32 states. The largest shopping mall in the U.S., Mall of America near Minneapolis, is managed by Indianapolis-based Simon Property.
“We are combining the two most recognized names in the retail real estate business into an organization of unparalleled size, talent and financial resources,” said David Simon, president and chief executive of Simon Property.
The two companies have a limited presence in Southern California. DeBartolo owns Mission Viejo Mall in Orange County and Desert Fashion Plaza near Palm Springs.
The merged firm would be known as Simon DeBartolo Group, and the DeBartolo family said it will keep its investment in the new company.
The proposed takeover, which still requires shareholder approval, marks the end of a real estate empire that took Edward J. DeBartolo Sr., the son of an Italian immigrant, 50 years to build. The Youngstown, Ohio-based business floundered in the late 1980s and early ‘90s, hit by economic recession and declining real estate values. DeBartolo died in December 1994.
DeBartolo was active in several major retailing takeover fights in the late ‘80s, including a failed 1986 run to take over the corporate parent of the Broadway department store chain in partnership with Limited Co., a large specialty retailer. In 1988, DeBartolo teamed up with Canadian developer Robert Campeau in the $8.8-billion takeover of Federated Department Stores Inc.
Edward J. DeBartolo Jr., son of the late founder and current chairman of DeBartolo Realty, wasn’t active in the day-to-day operations of the malls, focusing instead on his San Francisco 49ers football team and riverboat gambling ventures.
The acquisition of DeBartolo would give Simon Property a large presence in the fast-growing Florida market, complementing its malls in Texas and the Southwest. Simon Property, meanwhile, can finance renovation of DeBartolo’s aging shopping centers, analysts said. About 40% of DeBartolo’s malls are in Florida.
Simon Property and DeBartolo Realty are both real estate investment trusts whose shares are traded on the New York Stock Exchange. On Tuesday, Simon fell 37.5 cents to close at $23.625; DeBartolo rose 75 cents to $15.375.
