General Growth expected to back Brookfield
General Growth Properties Inc is expected to ask a bankruptcy court on Friday to approve an investment led by Brookfield Asset Management Inc , after reducing a related warrants package by 14 percent, a source familiar with the situation said.
The move would be a setback for Simon Property Group Inc , which raised its bid for General Growth, hoping its best and final offer would persuade the target to favor its deal.
General Growth believes that court approval of the Brookfield-led bid would protect its downside and give it greater flexibility in negotiating with Simon, which has bid $6.5 billion for all of the company, the source said.
General Growth understands, however, that the warrants, which are worth several hundred million dollars, would make a competing bid more expensive and so it would be willing to negotiate with Simon on a price that adjusts for them, the source said.
The investment gives General Growth room to negotiate around antitrust issues with Simon that could arise from a merger of the two largest U.S. mall owners, the source said.
The source declined to be named because the talks are not public.
Hedge fund manager William Ackman's Pershing Square Capital Management, which has committed to invest in General Growth alongside Brookfield, said on Friday it agreed to forgo interim warrants, reducing the overall package of warrants by 14 percent.
Pershing Square said it was agreeing to forgo the warrants on the condition that a bankruptcy hearing scheduled for Friday would proceed and that warrants would still be issued to Fairholme Capital Management, the other investor in the group, and to Brookfield, as previously contemplated.
(Reporting by Paritosh Bansal; Editing by Derek Caney and Steve Orlofsky)
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