Court freezes sale of 35 malls

Purchase by Rouse, 2 others is held up by shareholders' protest

February 28, 2002|By Meredith Cohn | Meredith Cohn,SUN STAFF

A Dutch court has frozen the $5.3 billion sale of an upscale U.S. shopping mall portfolio to three retail firms, including the Rouse Co., but officials at the Columbia-based company said yesterday that they remain optimistic that the massive deal will proceed.

The sale was held up after a Dutch shareholder group protested the actions of Rodamco North America NV, whose board of directors agreed to the sale last month. The company scheduled a shareholder vote March 5, but a judge wanted time to review the complaint. A hearing is scheduled for March 21 in the Enterprise Chamber of the Amsterdam Court of Appeal.

Anthony W. Deering, Rouse's chairman and chief executive officer, who helped negotiate the deal that would give his company control of eight more malls, said yesterday that he was sure the arrangement would be approved if all the shareholders were able to vote now. "We are confident the Rodamco company can resolve the outstanding legal issues and move the deal toward a final extraordinary general meeting of shareholders," he said.

The complaint stems from actions the company took after September, when Westfield America Trust became a major stockholder and launched a takeover bid.

Westfield had joined with the VEB, or Dutch Shareholders Associations, in filing a lawsuit in December that charges Rodamco with setting aside company shares in a questionable trust to prevent the takeover.

Rodamco also took actions to ensure that its top executives would be compensated if they lost control of the company, according to Westfield. That meant a healthy percentage of profit from any sale would go to them rather than shareholders.

Westfield dropped out of the lawsuit when it entered into the deal with Rouse and Simon Property Trust Inc. to buy Rodamco's 35 malls across the United States and other assets. VEB continued with its litigation alone to ensure that shareholders are given adequate information on company actions, according to Dutch media accounts of the court proceedings.

Deering said shareholders would not benefit from stopping the sale. He said Rodamco's stock price would likely drop and the hostile takeover threat re-emerge. Further, he said, the buyers are offering a price not likely to be matched. "Shareholders could lose control of the company and not get the cash," he said.

Rouse - owner of several area malls including The Mall in Columbia, Towson Town Center and the Gallery at Harborplace - agreed to pay $1.45 billion for its portion of the deal, which would include all or parts of eight malls and a third of other assets. It sold 14.5 million shares Jan. 17 to fund the purchase. If the Rodamco deal falls apart, the company will have diluted its stock for cash it would not have an immediate use for.

Analysts, who said they were surprised by the court's Feb. 22 action to stop the shareholder vote, agreed that Rodamco would not be able to get a better price.

"I can't image who else would be out there to buy [Rodamco]. It's too big. This tri-party bid is out there, and if it could have gotten a higher price it would have done it," said Louis W. Taylor, an analyst at Deutsche Bank in New York.

Analysts largely praised the deal, despite its large cost and the heavy debt incurred by the buyers, because large, profitable malls are not often for sale. After years of consolidation, five of the largest mall companies own more than a third of the nation's enclosed malls. Rouse is one the five.

Taylor, who said analysts had little information from Amsterdam about the legality of Rodamco's actions, said the contracts of sale were signed in the United States and were not likely to change. He said the company likely did not adequately inform its shareholders of the points of the deal.

Taylor predicted that the Dutch court would allow the shareholder vote to proceed and that the sale would close in the second quarter, but possibly be delayed a month.

Rodamco said in a statement that the company would reschedule the shareholder vote "as soon as practicable."

Westfield issued a statement that said, "In spite of the delay in convening the EGM [extraordinary general meeting of shareholders], Westfield expects that the completion date of the transaction will remain unchanged."

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