It is being reported that Sycamore Partners is trying to get out of their $525 million deal to acquire a controlling stake in Victoria’s Secret, claiming that the chain violated the agreement when they closed their stores due to the pandemic. I have not read that particular agreement, but I was curious whether there was a MAC (material adverse change) clause in Simon Property Group’s deal to buy Taubman Properties and extend their lead as the dominant shopping center REIT in the country.

The language in their merger agreement is likely similar to most that were drafted during a bull market (light on conditions that would allow the buyer to walk away). In fact, I was pretty surprised to see what events were listed specifically that would under no circumstance warrant exiting the deal. Form page 82 of the agreement:

*That’s right. Why should a pandemic impact the closing of a merger between shopping mall giants? :)*

I wonder if lawyers will leave pandemics on that list in future merger agreements or if Covid-19 really will come and go without leaving a trace longer term in the corporate world. Hopefully buyers will get smarter and protect themselves against long tail events.

Interestingly, TCO stock is currently trading around $41 per share (22% below the deal price of $52.50 in cash). As a Simon shareholder, I hope they are able to negotiate the price down but still use their vast liquidity to scoop up Taubman’s trophy assets. With the deal supposed to close around mid-year, we should find out soon enough.