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In this Nov. 28, 2014, file photo, shoppers look for deals inside the Flatiron Crossing Mall, a Macerich property in Broomfield, Colo. The Simon Property Group announced late Tuesday night March 31, 2015 it is calling off its hostile $16.8 billion takeover bid for Macerich which would have tied together two of the nation's largest mall operators.Brennan Linsley/The Associated Press

A U.S. mall operator owned in part by Ontario Teachers' Pension Plan is facing pressure from activist investors, but the company's shareholder rights plan stands in opposition to Teachers' publicly stated position on such measures.

Macerich Co., operator of more than 50 regional shopping centres in the United States, is facing off against some dissident investors in the wake of the company's rejection of a $16.8-billion (U.S.) takeover bid from commercial real estate giant Simon Property Group Inc.

The activists and their target are at odds not only over the merit of the deal, but also some changes to rules about the election of directors and share ownership put in place to deter Simon.

Teachers, which was involved in a joint venture with Macerich, traded its stake in five malls for shares in the company and debt in 2014. The pension plan wound up with $1.2-billion worth of common stock priced at $71 a share, or the equivalent of more than 10 per cent of Macerich's outstanding shares.

That was before Simon began acquiring shares in Macerich and eventually made an offer to buy the company in a bid that was increased to $95.50 a share in March of this year. The offer was rejected as too low by Macerich, which then made governance changes to "ensure that all stockholders have the opportunity to realize the long-term value of their investment in the company and are protected from coercive takeover attempts." These changes were unanimously approved by the board, but not voted on by shareholders.

This drew the ire of two U.S. investment managers, Land and Buildings and Orange Capital, which teamed up to try to get Macerich to elect new members to its board. The activist firms, which own a small stake in their target, sent letters to pressure Macerich's executive team to restart talks with Simon. Macerich's shares soared 20 per cent from the time Simon was rumoured to be sniffing around Macerich until it made its offers. The shares have fallen nearly 14 per cent since that high point.

Macerich's first governance move was to return the board to a staggered system, where directors are elected in several classes with multiyear terms – so not all of them will be up for re-election at the next annual meeting. The second change was to put in place a "poison pill" defence that granted each Macerich share one preferred-share purchase right that will kick in if any group acquires an ownership position of 10 per cent or more. The board move will be reviewed in 2016 and the poison pill is set to expire that year.

While the moves are expressly short-term in nature, they also represent the sorts of moves to block a takeover that the Teachers pension plan has said it disapproves of. Teachers' 2015 corporate governance principles and proxy voting guidelines make clear the group will "generally not support proposals that create a staggered board" unless it's a long-standing feature of the company. This is because it makes it difficult for shareholders to challenge or change board control.

On top of that, Teachers says it is usually opposed to shareholder rights plans "beyond ensuring equal treatment of shareholders in the event of a bid, allowing the company sufficient time to consider alternatives to a bid and permitting shareholders to make an informed decision about the bid and available alternatives."

Teachers does have a connection to Macerich's board, since John Sullivan, chief executive officer of its commercial real estate subsidiary, Cadillac Fairview Corp. Ltd., has a seat. Another former Cadillac Fairview executive also holds a seat. Spokespeople for Teachers could not be reached for comment.

Macerich will get a chance to explain its plans to boost shareholder value when the company holds its first-quarter earnings conference call on Thursday morning.

The company said on Wednesday that work has already begun.

"Over the past several years, Macerich has executed an extensive and successful portfolio transformation by selling lower-quality malls and recycling the capital into value-enhancing redevelopment opportunities," Arthur Coppola, CEO of Macerich, said in a statement accompanying the company's first-quarter results.

He added that Macerich is beginning to benefit from its efforts to transform the company.

Macerich (MAC)

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