But in doing so, Simon is picking a fight that history shows is tough to win.
Real-estate investment trusts like Macerich make for difficult hostile-takeover targets, thanks in part to state laws that protect them from unsolicited bids.
In Maryland, for example, where Macerich is incorporated, REITs can stagger their boards in the middle of a fight without shareholder approval. Doing so would mean only a minority of Macerich’s 12 directors would be up for re-election this spring, robbing Simon of the opportunity to gain control in one fell swoop in a proxy fight.
Macerich’s charter also prohibits any one investor from accumulating a 5% stake. The cap is meant to preserve certain federal tax benefits that could be endangered if a REIT is deemed to be too closely held — but it also serves as another effective shield against an unwanted takeover.
Macerich is considering staggering its board, according to a person familiar with the matter. The company has also hired Innisfree M&A Inc., a proxy-solicitation firm known for helping wage and defend against hostile bids, according to people familiar with the matter.
Simon could still mount a fight for board seats at Macerich, with the aim of picking up a few and ramping up public pressure on the company’s other directors to strike a deal. A window to nominate directors to Macerich’s board is currently open and closes March 31.
Another factor that could weigh in Simon’s favor: the two companies share a majority of their top-15 shareholders. Simon’s ability to rally those investors to its side will be a major factor determining whether, and at what price, any bid succeeds.
But the record of hostile bids for REITs underscores the challenges that lie ahead for the acquisitive company. Of 29 unsolicited attempts to acquire U.S. REITS since 1995 in which the target board was initially unreceptive, just five were completed – all, in the end, on friendly terms, according to Dealogic. Among those failed takeover attempts are two by Simon.