Stakeholder at Taubman Centers (TCO) Roots for Disposal

Taubman Centers Inc. TCO, a retail real estate investment trust (REIT), has been in limelight after a Bloomberg report revealed that Elliott Management’s Paul Singer is in preliminary talks with the company to go private.  

Shares of Taubman Centers traded high after the news surfaced yesterday, ascending 1.3% to $53.80 at market close.

The article, which cited people familiar with the matter, reported that after accumulating considerable stake in the company, this New York-domiciled hedge fund is advocating strategy changes in the shopping mall giant that includes disposing the company.

In addition to this, the above-mentioned activist fund has less than 5% interest in Taubman Centers. Hence, it can avoid regulator disclosure obligations.

This is not the first time that a shareholder, with significant interest in the company, has attempted to garner support and target the mall owner. Earlier this year, Land & Buildings Investment Management had attempted to oust two Taubman Centers’ board members in a proxy fight. The activist fund, run by Jonathan Litt, also suggested that the retail REIT should consider cost-cutting strategies as well as spin-off part or whole of the company.

Nevertheless, Litt failed to take over the reins of the company and lost the proxy fight against Taubman’s lead director Myron E. Ullman III, as well as chairman and chief executive officer — Robert Taubman. On Nov 9, the company announced the appointment of two new independent directors and made changes in its corporate governance.

Similarly, Brookfield Property Partners BPY, which currently owns 34% stake in GGP Inc. GGP, offered $14.8 billion to take the company private. Brookfield will reportedly pay $23 per share to acquire the remaining 66% stake in GGP. (Read more: GGP Investors Rejoice as Buyout Speculations Hit Headlines)

Of late, mall traffic has been adversely affected and retail landlords, including GGP Inc, Regency Centers Corporation REG and Kimco Realty Corporation KIM, have felt the heat due to consumers’ preferences increasingly shifting toward online retail. This has resulted in widespread store closures and bankruptcy filing by the owners. These challenging times have encouraged acquirers to take retail REITs private at favorable terms.

Shares of Taubman Centers have underperformed the industry it belongs to, year to date. The company’s shares have declined 27.2% as against the industry’s growth of 11.3%.

Taubman Centers currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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