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GGP agrees to takeover by Brookfield Property Partners

Brookfield Property Partners LP reached a deal to buy out all outstanding common shares it and its affiliates do not already own in regional mall landlord GGP Inc., confirming an earlier report.

The parties said GGP shareholders may opt to receive $23.50 per share in cash, or one Brookfield Property unit or one share of a new BPY U.S. REIT security, or BPR, for each GGP common share they own, subject to proration, based on total cash consideration of $9.25 billion.

Elections will be prorated based on the cash consideration and roughly 254 million Brookfield Property units or BPR shares. The transaction reflects aggregate consideration of about 61% cash and roughly 39% Brookfield Property or BPR equity. The new cash consideration reflects an increase of $1.85 billion from an earlier aggregate cash payment of $7.4 billion, or $23.00 per share.

The payment in the transaction will be structured as a dividend by GGP paid in cash and equity, subject to proration, and merger consideration paid in cash. All GGP shareholders will receive a portion of the consideration in cash, regardless of their election.

The deal is subject to the approval of GGP shareholders representing at least two-thirds of GGP's outstanding common stock and GGP shareholders representing a majority of its outstanding common stock not owned by Brookfield Property and its affiliates. Brookfield Property said it and its affiliates have agreed to vote in favor of the deal. GGP's special committee of nonexecutive, independent directors recommended that GGP shareholders approve the deal, which is anticipated to close early in the third quarter.

According to the release, the combined company will have an ownership interest in about $90 billion in total assets and annual net operating income of more than $4 billion. Following the deal's closing, GGP shareholders will own roughly 26% of the combined company.

GGP shareholders who receive equity consideration will be entitled to receive the same amount as the current distribution on Brookfield Property units or BPR shares they receive, which is more than 40% higher than GGP's dividend. For the second quarter, GGP shareholders will receive a dividend of up to 22 cents per share, which would be prorated if the transaction closes before June 30, according to a release.

Brookfield Property expects to fund the cash portion of the consideration with about $4 billion from joint-venture equity partners and financing from a syndicate of lenders led by Deutsche Bank, Morgan Stanley, RBC Capital Markets and Wells Fargo Bank NA, with additional commitments from Bank of America Merrill Lynch, Barclays, HSBC, SMBC and The Toronto-Dominion Bank.

Brookfield Asset Management Inc. agreed to guarantee the BPR shareholders' right to exchange a BPR share for a Brookfield Property unit or the cash equivalent of a Brookfield Property unit, for a period of at least 20 years. The asset manager also plans to convert $500 million currently held in Brookfield Property class C junior preferred shares into Brookfield Property units at $23.50 per unit, resulting in its purchase of about 21.3 million units in the company.

The transaction is expected to be immediately accretive to funds from operations per unit for Brookfield Property unit holders.

Weil Gotshal & Manges LLP, Goodwin Procter LLP and Torys LLP are legal counsel to Brookfield Property, with PwC serving as its tax adviser.

Goldman Sachs & Co. LLC is the financial adviser to GGP's special board committee, with Simpson Thacher & Bartlett LLP serving as its legal counsel. Citigroup Global Markets Inc. is GGP's financial adviser, while Sullivan & Cromwell LLP is its legal counsel.