David Simon doesn't mince his words. When rival company General Growth Properties rebuffed his $10 billion offer to buy the business out of Chapter 11 bankruptcy proceedings, Simon penned a sharply worded letter to Adam Metz, his counterpart as chief executive, writes Darrell Delamaide.
"Dear Adam" was probably the kindest thing he had to say. "It is simply wrong to characterise our offer as an 'indication of interest,'" Simon wrote. Rather, he went on to say, it is a firm, fully financed $10 billion offer that provides immediate 100% cash recovery of par value plus accrued interest and dividends to all unsecured creditors, plus more than $9 per share in value to shareholders – and has no financing contingency.
After months of unsuccessful efforts to negotiate the purchase, Simon, chief executive of the Simon Property Group, launched his public offer last week. And he was not going to be put off by any more of Metz's temporising. "Time and again," he wrote to Metz with dripping sarcasm, "serious engagement with us has been pushed off into some indefinite future when you might start to begin to commence a 'process.'"
When Metz countered by proffering a restrictive non-disclosure agreement as a basis for negotiation, Simon was once again brutally frank in his reply. "By continuing to request the unreasonable restrictions set forth in your proposed non-disclosure agreement," he wrote, "you render your 'process' a charade from the start by seeking to exclude the most logical and capable acquiror."
Simon, the second generation to run the largest US realty company, is accustomed to speaking his mind. He has been chief executive of Simon Property since 1995 and chairman since 2007. Just last month, Harvard Business Review named him one of the 50 best-performing CEOs in the world (No 46), out of 2,000 surveyed, for achieving a 325% total return at the company since taking the helm and adding $18 billion in shareholder value.
The group is acting from a position of strength because it has been hoarding cash and cutting costs since the recession began in the US in 2008, positioning itself to maintain its own market share in a difficult environment and to seize opportunities like that presented by General Growth's bankruptcy proceedings. The combined company would control 30% of the shopping malls in the US.
Adam Metz isn't the only one to feel Simon's iron fist. The 48-year-old son and nephew of SPG co-founders Melvin and Herb Simon has also repeatedly rebuffed his stepmother, Bren Simon, and is now embroiled by proxy in a bitter controversy with her over his father's will.
David Simon's sister, Deborah, has filed suit to contest the will of their father Melvin Simon. The will was revised last year just months before Melvin's death and increased the allocation to his wife at the expense of his children. Deborah says her father was not sufficiently competent to alter his will and cites as supporting evidence that his hand had to be guided for the signature.
Bren Simon has countered that Melvin was fully aware of what he was doing and took the action because he did not think his children would treat her, his second wife whom he married in 1972, in a fair manner after his death.
David Simon has not been particularly helpful to his stepmother. He blocked her from sitting on the board of the entity that controls the family stake in SPG. He cut the dividend, reducing the income flowing to Melvin and Bren. And most recently, he has refused to convert founder's shares to common stock, citing the ongoing litigation over the will.
In a recent filing, Bren has asked that David and a third sibling, Cindy Simon Skjodt, be named with Deborah as co-plaintiffs because they clearly share her interests.
The family dispute remains something of a sideshow, though. The children are not disinherited in the new will, and will hardly be paupers under its terms. Nor does it affect control of the firm, in which the family has an estimated 13% stake.
With Brookfield Asset Management, another big property company in Canada, reportedly readying a rival offer for General Growth, David Simon is likely to keep his focus on business, not on the family dispute.