The Taubman family may soon be the last holdout in the battle to keep Taubman Centers out of the hands of Simon Property Group. Earlier in the week, the Bloomfield Hills, Mich.-based REIT issued a press release vehemently rejecting the Simon/Westfield bid for control of the company at $20 per share. "Our company is not for sale" has become Taubman’s mantra. Today, a Michigan court shot down part of Simon’s legal case against Taubman’s board of directors. District court Judge Victoria Roberts ruled that Taubman’s issuance of preferred B shares was legal. Wall Street analysts say the ruling is a blow to Simon’s legal case, but will not keep Taubman safe for long.

"While we view this setback as a negative for a quick Simon takeover, the judge expressly stated that the legality of Taubman’s gathering of voting interest in order to create its 1/3 blocking stake remains open for question," says Morgan Stanley REIT analyst Matthew Ostrower in his report on the ruling. "Simon’s other four counts (two of which allege breach of fiduciary duty by TCO management) also remain outstanding." These legal decisions will be made in March, when the actual trial is set to begin.

The significance of series B shares in question is that they give the Taubman family the right to vote their ownership units and continue to veto the Simon/Westfield takeover. Ostrower and Deutsche Bank Securities analyst Louis Taylor both believe Simon can convince two-thirds of Taubman’s common shareholders to accept the $20 offer, which would improve Simon’s legal case and possibly influence Taubman board’s independent members to approve the deal.

Simon and Westfield have stated that the $20 offer will be the maximum bid, and analysts predictions that a third party would step up the bidding haven’t panned out. How long can the Taubman board continue to convince common shareholders that the company is worth more than $20 per share? If Simon’s legal and public relations campaigns against Taubman continue, probably not for long, Ostrower says.

And what if Simon opts for a different tactic? Deutsche Bank’s Taylor says Simon also has the option of proposing an alternative group of Taubman directors. "If this route were successful, it could mean that two of the five independent directors could change and William Taubman could lose his Board seat," Taylor says in a report released today. "This may not be enough to change the outcome short-term, but it would be another signal to the remaining directors and management."

In order to elect new directors, Simon's nominees would have to garner a plurality of Taubman’s voting shares. The voting shares include the contested Class B shares. As these shares represent one-third of the votes, alternate directors would have to get about 75 percent of the remaining shares. "Not an insurmountable challenge," Taylor says, "but a challenge nonetheless."