Taubman Centers Inc. has rebuffed an unsolicited cash offer from Indianapolis, Ind.-based Simon Property Group to purchase the Bloomfield, Mich.-based REIT. Simon, which controls more leased mall space than any other North American firm, offered $17.50 cash for each Taubman share, or $1.48 million. The offer was structured so that Simon would assume Taubman’s $2.4 billion debt.

Taubman (NYSE: TCO) shares rose 12% yesterday after the deal was disclosed. Simon’s (NYSE: SPG) shares dropped 2.5% on the news.

In a statement, Taubman rejected the offer yesterday, emphasizing that the Taubman family — which is strongly against a sale — controls more than 30% of the firm’s voting shares.

The Simon bid further exemplifies a trend of consolidation among U.S mall operators in recent years. The business is dominated by a handful of REITs held by a small circle of families.

"I think that people are just trying to get larger, and the smaller folks are realizing that right now it’s a difficult playing field. Maybe right now is the time to sell," says Patrice Duker, a spokesperson for the International Council of Shopping Centers, a New York-based industry trade group.

In her view, the offer’s potential to spark a bidding war "could go either way."

"But when times get tough, some things have to fall to the wayside. Higher-end items are facing that choice this year," she says.

Simon owns or has an interest in 249 properties that encompass over 186 million sq. ft. in 36 states. Major properties include the Fashion Center in Washington, D.C., The Forum Shops in Las Vegas and Minnesota’s Mall of America.

Taubman owns or manages 30 shopping centers in 13 states.

Alfred Taubman, formerly chairman of Taubman, resigned last year after being convicted on price-fixing charges stemming from his former position as chairman of British auction house Sotheby’s Holdings. Taubman is now serving a one-year prison term. Like Simon, Taubman now is run by the son of its founder.