Simon Property Group Inc. withdrew a $16.8 billion proposal to acquire Macerich Co. after the smaller mall owner rejected the sweetened takeover offer as too low.

Macerich said in a statement late Tuesday that the $95.50-a-share offer did not reflect the full value of the company. Simon said separately that it pulled its bid after Macerich's board refused to engage in talks.

Both companies operate malls in the Philadelphia region.

Simon, the largest U.S. mall landlord, said on March 20 that its latest bid was final after Macerich rebuffed a proposal of $91 a share. Purchasing the Santa Monica, Calif.-based real estate investment trust would have allowed Simon to add top-tier properties that rarely come up for sale.

"The board unanimously concluded that your proposal continues to substantially undervalue Macerich," chairman and chief executive officer Arthur Coppola said in a letter to Simon chairman and CEO David Simon, included in the statement. "Our board believes that continuing to execute on our strategic plan will yield substantially more value for our stockholders."

Macerich took steps to thwart a hostile takeover after the first public offer. The company said March 17 that its board approved a staggered election of directors, which would make it more difficult to oust the board, and adopted a "poison pill" defense designed to raise the price Simon would have to pay.

Investors had been betting that Simon's latest offer wouldn't be enough for a deal. Macerich shares closed Tuesday at $84.33, down from $93.50 on the day before the new bid. The company's stock declined again Wednesday, falling to $78.73.

Simon counts King of Prussia, Philadelphia Mills, and Oxford Valley among its nine malls in the Philadelphia region.

Macerich, which recently renovated Deptford Mall, said in July that it would invest $107 million in the Gallery at Market East in a joint venture with mall manager Pennsylvania Real Estate Investment Trust. That arrangement also requires an agreement with the City of Philadelphia.

While the bid rejection was expected, Macerich's refusal "without any offer to engage Simon or explore 'strategic alternatives' is surprising and frankly difficult to understand," Stifel Nicolaus & Co. analysts led by Nathan Isbee wrote in a note to clients Wednesday. Macerich "could face a sustained period of underperformance."

Macerich owns or has stakes in more than 50 malls, including Tysons Corner Center in Virginia, Westside Pavilion in Los Angeles, and the Shops at North Bridge in Chicago. The company, founded in 1964 in Ames, Iowa, by Mace Siegel, has been upgrading its centers, similar to what its mall-landlord peers are doing.