Simon Sells ABG Stake, Eyes Express Despite Cooling Retail Holdings

U.S. mall giant Simon Property Group
Simon Property Group
has exited Authentic Brands Group (ABG), selling off its near 10% stake in the international brand management business for nearly $1.2 billion.

That put Simon’s total proceeds for what was, at its highest, a 12% stake in Authentic at $1.45 billion over the past two quarters. after the company previously sold shares in the fourth quarter.

Among those picking up Simon’s shares were Leonard Green & Partners, General Atlantic, HPS Partners, Jasper Ridge Partners and Singaporean sovereign wealth fund Temasek Holdings.

At the same time it is considering a zero-capital deal for embattled Express Inc.

And neither is it the end of the road for Simon Property Group and ABG, which still have a joint venture called SPARC which oversees a range of major brands, mostly those that had been in distress when acquired. They also have stakes in department store JC Penney, along with fellow real estate giant Brookfield.

Of why Simon decided to sell its holding ABG, chairman, president and CEO David Simon put the decision down simply to getting the right bid at the right time.

Indeed, Simon has gradually been pulling back from its retail investments and had previously intimated that the company could withdraw from its retail holdings within five to 10 years. Following that, it diluted its stake in SPARC after signing a deal with China’s Shein and sold its interests in Eddie Bauer.

“We generated substantial value from the ABG investment and a seven-times multiple on our net invested capital during our short ownership period,” he told analysts on a call, and the company has always insisted that its investments in retail were ultimately not a core business.

“There’s nothing that I wouldn’t sell at the right price across the company and worldwide, period, end of story,” Simon added. “It’s very simple. If we got the cash, I know we would find an appropriate investment that would replace the earnings lost. It’s really that simple.”

Simon Buys Up Retailers

When mall giant Simon Property Group bought fashion retailer Aéropostale out of bankruptcy in 2016, it was viewed by the market as a short-term gamble from a company desperate to avoid a new wave of empty storefronts across its portfolio.

Yet around eight years on, Simon has swelled the portfolio of retail brands it owns stakes in as part of its joint venture with ABG, including Nautica from VF
VF
Corp. in 2018, then in 2020 the company accelerated acquisitions and agreed a deal to buy big-box fashion retailer Forever 21 from bankruptcy for $81 million. The same year, it bought Lucky Brand out of Chapter 11 for $140 million and purchased Brooks Brothers, also in bankruptcy, for $325 million.

SPARC’s most recent additions were the 2021 acquisitions of Eddie Bauer (since sold), and the brand of sports retailer Reebok.

And despite selling its ABG stock holdings, Simon has also said that it may go ahead with a proposed deal to acquire bankrupt apparel company Express
Express
Inc., which has received a non-binding letter of intent from a consortium led by WHP Global, a wholly owned subsidiary of Simon Property Group and Brookfield Properties, for the potential purchase of the company’s retail stores and operations.

The Express deal goes would be a zero-capital acquisition and would stem losing many of the stores from Simon and Brookfield malls – the original intention of those earlier acquisitions. But David Simon remians bullish about deploying capital.

“We feel like the mall has made a big comeback,” Simon said. “We have $11 billion of liquidity. It’s realistic to assume we may go through a reasonable slowdown here coming up. That’s when we do our best work. That’s when others get tired and throw in the towel. That’s where we get rejuvenated.”