CSC dismisses latest Simon proposal on Trafford Centre

London-listed Capital Shopping Centres Group has described the latest proposal made by Simon Property Group (SPG) in relation to the EUR 1.9 bn acquisition of Trafford Centre shopping centre in Manchester as 'incapable of implementation and completely impracticable'.

US-based SPG, which owns 5% of CSC's shares, has warned the transaction, as currently structured, will inflict 'profound value destruction' on CSC and its shareholders.

CSC plans to pay for the trophy shopping centre with a discounted share issue, which would involve 224 million shares with a blended price of 367 pence per share. This would leave the vendor, Peel Group, with a 20% stake in CSC. In addition, John Whittaker, chairman of Peel, is to join the CSC board.

When the deal was unveiled in late November SPG said it believed the deal over-valued the Trafford Centre and it asked that the transaction be postponed to allow SPG to make an offer for CSC. This demand and a subsequent request for due diligence information were rejected by CSC. SPG said it would vote against the deal and that it would consider selling its stake in CSC if the vote on the Trafford Centre goes against it.

This weekend SPG sent a second letter to the CSC board acknowledging that Trafford Centre may be a 'strategically important asset' though still overvalued.

SPG offered to fund the acquisition of the centre through an alternative share placing. 'As a more attractive and less dilutive alternative, we would be prepared to subscribe, subject to a clawback, for fully diluted issue of 205.5 million new ordinary shares at a price of 400 pence per share, representing a 9% premium to Peel's blended share price of 367p per share, as well as a 6.1% premium to NAV.'

In its response, CSC noted that Peel Group wants to remain invested in UK regional shopping centres and does not wish to sell the Trafford Centre for cash in the manner SPG is suggesting. The CSC board noted that what SPG proposes would provide SPG with a holding of between 18.4% and 26.9% in CSC.

'It is not open to CSC unilaterally to alter the terms of its legally binding contract with Peel. Therefore, what SPG proposes does not provide a genuine alternative for CSC shareholders.'