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Commercial real estate company Brookfield Property Partners LP said on Monday it would acquire the 66 per cent of GGP Inc that it does not already own in a cash-and-stock deal that values GGP, one of the largest owners and operators of U.S. shopping centres, at about $15.3-billion.

The deal comes as many malls struggle to retain tenants amid the brick-and-mortar retail sector’s downturn. The acquisition will strengthen Brookfield Property’s negotiating power with retailers and allow it to repurpose some GGP properties.

“Having Brookfield’s expertise in offices, hotels and multi-family residential properties will allow the combined company to draw more value from the GGP mall assets,” Brookfield Property Chief Executive Brian Kingston told Reuters in an interview.

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The agreement comes four months after a special board committee of GGP rejected a $14.8-billion cash-and-stock offer from Brookfield Property as inadequate.

Brookfield Property, which is also a major owner of U.S. office properties, is currently GGP’s largest shareholder with a 34 per cent stake.

Under Brookfield Property’s latest offer, which was first reported by Reuters earlier this month, GGP shareholders can elect to receive $23.50 in cash per share, or either one Brookfield unit or one newly created share that trades as a real estate investment trust (REIT). GGP shares ended trading on Monday at $21.21.

The complex deal structure is the result of a compromise between Brookfield Property, which wanted to continue to trade as a publicly listed partnership, and GGP’s special committee, which wanted GGP shareholders to continue to own a REIT security, if they so choose.

The cash consideration in the deal was increased by $1.85-billion to $9.25-billion. Instead of a 50/50 split under Brookfield Property’s previous offer, cash now represents 61 per cent of the total deal.

With about 127 “Class A” high-end mall properties, mostly in the United States, GGP’s tenants include car maker Tesla Inc, jeweller Tiffany & Co and retailer Macy’s Inc.

It is not the first time Brookfield Property’s attempt to take over a REIT in which it already owns a big stake was rejected, only for it to subsequently succeed.

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In 2016, Rouse Properties Inc, another U.S. mall owner, rejected an offer by Brookfield Property, its largest shareholder. It eventually agreed to a sweetened $2.8-billion offer.

Goldman Sachs Group Inc served as financial adviser and Simpson Thacher & Bartlett LLP served as legal counsel to GGP’s special committee. Citigroup Inc served as financial adviser and Sullivan & Cromwell LLP served as legal counsel to GGP. Weil, Gotshal & Manges LLP, Goodwin Procter LLP and Torys LLP served as legal counsel to Brookfield Property.

Stocks raced significantly higher Monday as fear of a trade war between the U.S. and China eased after Beijing showed willingness to meet some of Washington's demands. Conway G. Gittens reports. Reuters
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