A legal fight is brewing between Indianapolis-based Simon Property Group Inc. and rival mall owner and operator Taubman Centers Inc. over a $3.6 billion merger deal Simon terminated last week.

"Simon is the largest mall operator in the U.S., owning and managing 168 shopping centers.

Executives took 25-30% pay cuts. 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. Simon said in its press release that the merger agreement "specifically gave Simon the right to terminate the transaction in the event that a pandemic disproportionately hurt Taubman." As of March 31, Taubman had $395 million in cash on its consolidated balance sheet.Simon and Taubman shuttered properties as nonessential businesses closed to slow coronavirus transmission. Taubman Centers Inc. is firing back at Simon Property Group Inc. in an attempt to salvage a planned $3.6 billion merger. Taubman fought off a hostile takeover bid from Simon and Westfield (now Unibail-Rodamco-Westfield) in 2003, and industry watchers have long said that Simon and Taubman would be better together. Simon Property Group Inc. and Taubman Centers Inc. leadership framed their companies' planned merger as a win for all stakeholders and described the combined entity that will result from the deal as a partnership where a collaborative spirit will reign.

The company also is suing The Gap Inc. for back rent.The Indiana company has filed suit in the 6th Judicial Circuit Court in Oakland County, Michigan, seeking to declare that Taubman breached the merger agreement in regards to its business operations in wake of the coronavirus pandemic. "While Taubman’s shopping centers are now beginning to reopen, they are emerging in a fundamentally changed environment," Simon said. 88 … The deal was expected to increase Simon's funds for operation and close by midyear. "Taubman intends to hold Simon to its obligations under the merger agreement and the agreed transaction, and to vigorously contest Simon’s purported termination and legal claims. "Taubman has failed to take steps to mitigate the impact of the pandemic as others in the industry have, including by not making essential cuts in operating expenses and capital expenditures," Simon said in a statement announcing the deal's termination.Mall tenants such as The Gap and Cheesecake Factory stopped paying rents while retailers like J. "Taubman believes 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," a statement from the company said. The company furloughed and terminated more than half of its employees. The declaration was followed by a national emergency in the U.S. and subsequent  "stay at home" and "shelter in place" orders at the state level.But Simon has walked away, accusing Taubman of doing little to mitigate the dire financial impact of the novel coronavirus pandemic.

Taubman owns, leases and manages 26 regional, superregional and outlets malls in the U.S. and Asia.Simon contends that Taubman did not implement comparable measures and its executives maintained lucrative salaries.Simon notes that the tourism industry has been decimated, and Taubman's up-scale properties serve wealthy consumers who are now likely to shop online. Crew, J.C. Penney and Neiman Marcus declared bankruptcy.Simon announced in February plans to acquire an 80% ownership stake in Taubman Realty Group Limited Partnership. Taubman Centers, Inc. (NYSE: TCO) (“Taubman”) confirmed that Simon Property Group, Inc. (“Simon”) has today delivered a notice purporting to terminate the previously announced Agreement and Plan of Merger among Simon, Taubman, The Taubman Realty Group Limited Partnership (“TRG”) and other parties.

David Simon also waived his 2020 base salary.The lawsuit comes about a month after CEO David Simon declined to discuss the Taubman deal during a first quarter earnings call, giving credence to speculation that the merger would not occur.Additionally, the company said it slashed planned capital expenditures by roughly 70%, or more than $1 billion. In late March, the company drew down $350 million of its $1.1 billion line of credit as a precautionary measure to increase liquidity and preserve financial flexibility, resulting in $970 million outstanding.Taubman's properties include the Beverly Center in Los Angeles, The Mall at Millenia in Orlando and the International Marketplace in Waikiki, Hawaii.The drawdown was virtually all that was left of the credit line, Simon noted. Simon Property Group Inc. has held merger talks with rival U.S. shopping-mall operator Taubman Centers Inc., according to people familiar with the matter. The pandemic disproportionately affected the Michigan-based real estate investment trust compared with other retail real estate companies, Simon said in court documents. The luxury shopping mall developer Taubman Centers included an intriguing warning in its response Wednesday afternoon to a lawsuit by its erstwhile merger partner Simon Properties. The lawsuit said the exponential growth in online shopping spurred by a change in consumer behavior during the pandemic is expected to be permanent.

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