LOS ANGELES — Simon Property Group, the nation's largest shopping mall owner, made a $10 billion hostile bid Tuesday to acquire ailing rival General Growth Properties.
The acquisition would allow General Growth, the No. 2 owner of shopping centers, to emerge from Chapter 11 bankruptcy protection. General Growth filed for bankruptcy last year after buckling under the weight of billions in debt it racked up during a massive expansion effort fueled by cheap credit.
The move is Simon's second major acquisition in three months. In December, Simon offered $700 million in cash and stock to buy more than 60 outlet shopping centers from another competitor, Prime Outlets Acquisition Co.
Simon is using its comfortable cash cushion and credit lines to take advantage of falling commercial property values, which are off 40 percent from their peak in 2007. And General Growth has some prized centers, including the Glendale Galleria in Southern California and the South Street Seaport in Manhattan.
The offer for General Growth would fully repay $7 billion to General Growth's unsecured creditors and $3 billion to shareholders. Stockholders would get $6 a share in cash and $3 a share in other assets. The offer, however, might be amended so shareholders could receive Simon stock instead of cash.
Simon made the public offer after General Growth executives failed to make a "substantive response" Simon's overtures.
"Simon's offer provides the best possible outcome for all General Growth stakeholders," said David Simon, chairman and CEO, in a statement.
Though the official committee for General Growth's unsecured creditors has backed the deal, stockholders appeared to be looking for a sweeter offer from Simon or one of its competitors. Shares in General Growth shot up nearly 21 percent, or $1.97, to $11.37 in midday trading.
Alexander Goldfarb, an analyst with Sandler O'Neill & Partners, said he expects other offers to drive the bidding higher.
"General Growth has a number of options," Goldfarb said. "This is not the only one."
A spokesman Chicago-based General Growth had no immediate comment.
Simon, unlike many of its competitors, has been able to weather the economic downturn thanks in part to its higher rents. The Indianapolis-based company popularized the so-called lifestyle center mall design that turned malls into veritable neighborhood-like communities. Simon owns more than 380 properties, including Arizona Mills in Tempe, Houston Galleria and the Fashion Valley Mall in San Diego.
Earlier this month, Simon reported a decline in fourth-quarter results, in part due to a one-time charge. But it still managed to beat Wall Street forecasts and its revenue held steady.
Simon shares rose $1.90 to $73.90 in midday trading.