Del. court is asked to let sale of Rouse go through

Md. company, acquirer say deal with Hughes heirs doesn't block merger

October 20, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

The Rouse Co. and its intended acquirer asked a Delaware court yesterday to make sure the merger doesn't fall apart or drag on until next year because of an objection by heirs of the late billionaire Howard Hughes.

Hughes' heirs are owed Rouse stock through 2009 as part of a complicated deal that allowed Rouse to buy Hughes' real estate in Las Vegas and Los Angeles in 1996.

Rouse said last night that the heirs are contending that the pending $12.6 billion sale of Rouse to General Growth Properties is a "prohibited transaction" under the Hughes deal and therefore requires their approval.

The two companies are asking the Delaware Chancery Court to declare that the sale is not a prohibited transaction.

Rouse said in a statement that it and General Growth, a Chicago based mall developer, believe the sale will not be affected by the objections of the heirs.

General Growth responded to the heirs yesterday with a plan designed to ease their concerns, Rouse said. Yesterday's legal action was taken "to minimize any uncertainty and any risk of delay" of the merger, the Columbia company said.

Neither company could be reached for further comment.

Rouse's purchase of Hughes Corp. in 1996 brought with it 59 office buildings, the Fashion Show Mall in Las Vegas, the 22,500-acre planned community of Summerlin, near Las Vegas, and a 1,100-acre project known as Playa Vista in Los Angeles.

As part of the deal, Rouse entered into a contingent stock agreement with the heirs, who have since been sharing in the profits of the land development by being paid in Rouse stock rather than cash.

That deal gave the Hughes heirs the right to keep Rouse from entering into certain transactions - for instance, a merger that would keep them from continuing to get stock comparable to Rouse's or that would likely cause them tax problems.

Rouse, which expects to complete the General Growth merger by the end of the year, told the heirs soon after the deal was struck in August that it did not think the deal was prohibited because General Growth had agreed to honor the contingent stock agreement.

Representatives of the Hughes heirs protested Friday to both companies, Rouse said. The heirs expect tax problems and said there is no agreement in place detailing how General Growth shares will be issued in place of Rouse's to correct any shortfalls in contingent shares now, Rouse said.

General Growth delivered an agreement yesterday promising to honor the Rouse arrangement with the Hughes heirs.

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