Melvin Simon estate collects $944M from share sale - Estate of Denial

Simon Property Group Inc. has settled a dispute with the estate of its late founder Melvin Simon, converting his ownership units into common shares worth $944 million.

The Melvin Simon Family Enterprises Trust sold the shares to the public in an offering managed by Bank of America Merrill Lynch, the company said Thursday in a Securities and Exchange Commission filing.

IBJ first reported the company?s plan to sell the shares Wednesday night.

The agreement extracts the publicly traded company from an ongoing battle in Hamilton County over Melvin?s more than $2 billion estate. The fight pits Melvin?s widow Bren Simon against his children from an earlier marriage: Deborah Simon, Cynthia Simon-Skjodt and Simon Property Group CEO David Simon.

A jury trial is scheduled for July 2013.

Shares of the Indianapolis-based company declined about 3 percent, to $155.75 in early trading Thursday. It is not uncommon for a company?s stock to fall when an offering is made, because such a sale can dilute the value of current shares.

The ownership units were designed to convert at a ratio of one-to-one with the company?s common shares, but the deal converted about 6.5 million ownership units for roughly 5.9 million shares, the company said.

The conversion as executed saves the company more than $100 million. However, it can be seen as a win-win since the estate?s take is more than 50 percent higher than it would have been had Bren succeeded in an attempt to convert the units months after Melvin died in late 2009.

When Bren tried to convert the units, Simon Property Group intervened in the estate case, arguing a simmering dispute over the estate proceeds amounted to a lien on the ownership units and prevented conversion.

Hamilton County Superior Court Judge William J. Hughes in December 2010 removed Bren as trustee over her late husband?s estate, citing among other reasons her attempt to liquidate the ownership stake without advice from a financial professional.

Hughes appointed former Indiana Supreme Court Justice Theodore R. Boehm to replace Bren as trustee and as Melvin?s personal representative.

The conversion of the units?a large chunk, but not all, of the estate?s Simon holdings?allows the trust to diversify its assets, preserving the proceeds for all of the trust?s ultimate beneficiaries.

The docket in the estate case suggests Hughes signed off on the deal during a hearing on Monday. The proceedings were sealed, presumably to allow the public company to comply with SEC requirements for dissemination of news concerning insider sales.

The lead plaintiff in the case is Melvin?s daughter Deborah Simon, who claims her stepmother coerced Melvin to make changes to his estate plan in February 2009, seven months before he died at age 82.

Bren has claimed in court filings that the changes to the will reflected Melvin?s desire to compensate her for a drop in the company?s stock price and a reduction in the cash dividend.

The company eventually restored the dividend and its stock bounded higher.

Melvin in 1960 co-founded what would become Simon Property Group with his brother Herb. The company went public in 1993.

Attribution:

Melvin Simon estate collects $944M from share sale
Cory Schouten
September 20, 2012
Indianapolis Business Journal
http://www.ibj.com/melvin-simon-estate-could-collect?944m-from-share-sale/PARAMS/article/36786

Additional coverage:

Simon Property Group agrees to stock deal with founder?s estate
Jeff Swiatek
September 20, 2012
IndyStar.com
http://www.indystar.com/article/20120920/BUSINESS/209210311/Simon-Property-Group-agrees-stock-deal-founder-s-estate

Shopping mall giant Simon Property Group has settled its dispute with the family trust of its former co-founder by agreeing to swap his founder?s shares for tradeable stock, but at less than a one-for-one rate.

The deal, announced today, raised over $900 million in cash for the estate of Melvin Simon, whose primary beneficiary is his widow Bren Simon.

The Indianapolis developer had fought the stock conversion in court for more than two years, saying it couldn?t do the swap because the trust was involved in a legal dispute with Melvin Simon?s heirs that amounted to a ?lien? on the shares.

The trust, formerly run by Bren Simon and now overseen by a court-appointed trustee, argued that the trust?s assets were made up almost totally of founder?s shares in the Simon company and the trust needed to diversify the holdings.

Under the settlement, the trust agreed to accept less than the one-for-one exchange of units for tradeable shares it was entitled to. In exchange for its 6,526,245 founder?s units, the trust received 5,873,620 shares of common stock.

The deal essentially eliminates 652,625 shares of Simon stock, worth about $100 million, benefitting the company because it no longer must pay dividends on those shares.

The trust seemed to benefit financially from the delay as well, because Simon stock in early 2010, when the trust first proposed to divest the founder?s units, was worth only about $83 a share.

The settlement has been filed under seal in Hamilton County courts. A Simon company spokesman wouldn?t comment publicly on the settlement, referring to a company-issued statement.

Melvin Simon died in 2010 and his estate has been involved in litigation in Hamilton County courts for over two years. One of his daughters wants a judge to invalidate her father?s will on the grounds that Bren Simon used duress to get him to change its terms while he was too ill to think clearly for himself.

Source: http://www.estateofdenial.com/2012/09/26/melvin-simon-estate-collects-944m-from-share-sale-in/

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