Simon Property ends pursuit of Macerich

(Reuters) - Simon Property Group Inc scrapped its attempt to buy Macerich Co , ending what could have been the largest deal between U.S. shopping mall operators after Macerich rejected its sweetened offer of $23.2 billion including debt.

Shares of Macerich, which said the raised offer still undervalued the company, fell 5 percent to $80 in premarket trading on Wednesday.

Simon Property, the largest U.S. shopping mall owner, raised its offer last month to what it called its "best and final offer" of $95.50 per share. Its previous bid was for $91.00 per share.

"What did Macerich have to lose by, at the very least, talking to Simon Property to determine what was the true 'best and final offer'?" Stifel Nicolaus analyst Nathan Isbee said.

Macerich said it would continue to sell its lower growth properties and set a target to increase operating margins by 4 percent over the next 18-24 months.

"We wonder why these initiatives were not adopted prior to Simon Property's takeover attempt," Evercore Partners analyst Steve Sakwa said.

Simon Property, led by former investment banker David Simon, has been aggressive in its takeover strategy. In 2010, the company tried to buy General Growth Properties Inc , now the No. 2 mall owner, with a $10 billion offer.

"Simon could decide to re-focus on its market share in Europe and perhaps consider increasing its stake in Klepierre, given weakness in the Euro and very favorable long term financing," Cowen & Company analyst James Sullivan said.

Simon Property partly owns French shopping mall operator Klepierre .

Macerich shares were down 4.7 percent at $80.39 in early trading. Up to Tuesday's close of $84.33, they had fallen 11 percent since March 16, a day before the company rejected Simon Property's first offer.

Simon Property's shares were down 0.2 percent at $195.14.

(Additional reporting by Rachel Chitra in Bengaluru; Editing by Saumyadeb Chakrabarty)