Simon's Taubman takeover rhetoric seems to be losing steam in the face of the Bloomfield Hills, Mich.-based REIT's recent court victory in its home state. Many Wall Street analysts who previously viewed the takeover as a done deal are now backpedaling, saying that the deal could fizzle out after all.

Last week, the Michigan State Senate voted 24-14 in favor of legislation that will help Taubman Centers fend off the hostile takeover launched by Simon Property Group and Westfield America Trust by making its use of family-owned shares legal. The legislation, which has already passed the Michigan House, will become law after Governor Jennifer Granholm signs it. Taubman Centers will go before the Michigan State Appeals court in late October to ask the court to use the legislation to clarify what constitutes a control share acquisition. Such a clarification would allow the Taubman family to vote its 33.6 percent block of common shares against the Simon/Westfield takeover bid, according to Deutsche Bank Securities analyst Lou Taylor.

Simon and Westfield may be reluctant to continue fighting if the court accepts the new law and reinstates the Taubman family's right to vote, says Morgan Stanley analyst Matthew Ostrower. "They appear to have become more pessimistic in the face of a large Taubman Centers stock buyback and worry that victory in the proxy process might simply result in an auction they would not win," he says in a recent report. According to Ostrower, Simon is concerned that Taubman Centers will not only finish buying back the $103 million worth of shares its board has authorized, but also seek additional buyback authorization. This would make it nearly impossible for Asimon to gain control of the Taubman board by nominating proxy board members to be approved by the REIT's common stock shareholders.

Westfield remains the wildcard in the scenario. "While we have not had the opportunity to hear Simon's concerns, it is not yet clear to us whether Westfield shares them to the same degree," Ostrower says. "It seems possible that Westfield could continue a takeover attempt even if Simon decides to drop out. And Simon and Westfield may have other plans of which we are not aware."

More on Taubman Centers Takeover Fight:
My Three Sons
REITs go shopping — for other REITs
Simon Claims Limited Victory in Taubman Takeover Lawsuit, But the Fight is Far From Over
Will A White Knight Save Taubman?
Home State Steps In To Defend Taubman From Takeover
The Taubman/Simon Family Feud Continues…