December 15, 2010 / 8:09 AM / 9 years ago

CSC spurns Simon Property's 3 billion-pound offer

LONDON/NEW YORK (Reuters) - Capital Shopping Centres CSCG.L on Wednesday rejected an offer from Simon Property (SPG.N) valuing it at 2.9 billion pounds ($4.5 billion) and postponed a vote on another deal that would have reduced Simon’s stake in CSC.

Simon’s preliminary offer, which is an informal bid of 425 pence per share, comes as real estate investors show new interest in UK malls, which they expect to rise in value as the British economy stages a tentative recovery.

Simon, the biggest U.S. mall owner with 373 properties in North America, Europe and Asia, said the offer was at a 16 percent premium to the price of the shares that CSC plans to issue to buy Manchester’s Trafford Centre. That deal was announced November 25.

In a statement, CSC’s board said it unanimously rejected the offer from its 5.1 percent shareholder, adding it “is yet another attempt by Simon to frustrate the Trafford Centre acquisition without putting forward a proper proposal for CSC shareholders to consider as an alternative.”

Simon had urged CSC shareholders to oppose the Trafford Centre deal at a meeting scheduled for December 20. Since then, CSC has postponed the meeting, saying that it needs more time to give shareholders information about Simon’s proposal.

CSC has spurned two other Simon proposals.

Simon’s shares were down 2.3 percent in late-afternoon trading. Shares of CSC — Britain’s biggest mall owner with 13 regional shopping centres — closed at 409 pence up 5.9 percent, outperforming the UK property stocks index .FTELUK which gained 0.5 percent.

COMPLICATED

UK billionaire John Whittaker’s Peel Group was set to take a nearly 20 percent stake in CSC by selling the Trafford Centre to it for 1.6 billion pounds. Whittaker would become CSC’s deputy chairman and its largest shareholder.

The Trafford Centre deal would dilute Simon’s stake in CSC. Simon has said that it would not buy CSC if the Trafford deal goes through.

CSC said it likely would reschedule its shareholder meeting for late January, and that its advisers are in talks with the UK Takeover Panel to establish a latest date by which Simon must make a formal offer.

It added that Simon’s proposal “very substantially undervalues the company.”

“Simon could still usurp the process with a recommended offer, but based on the wording of CSC’s statement this afternoon, it will likely have to be priced at over 450 pence,” said Execution Noble analyst Michael Burt.

DUE DILIGENCE INFO

In a statement on Wednesday, Simon said its board supports its offer, and expects CSC to provide information to help it make its formal offer.

Simon, which earlier this year abandoned its $6.5 billion bid for U.S. rival General Growth Properties GGP.N and sold assets in Europe, has not said why it wants to own CSC. David Simon did not return calls.

The acquisition would give Simon a large portfolio of British mall properties which are difficult to come, and provide a launch pad for further growth in the country, said Green Street Advisors analyst Cedrik Lachance.

Some Simon shareholders do not see the point of the deal.

“In reality, Simon’s a fairly compelling story in terms in internal growth,” said Jeung Hyun, portfolio manager with Adelante Capital Management, which owns Simon shares. “The deal is not particularly accretive from a net asset value or earnings perspective. So why do it?”

Simon, which at the end of September had $1.3 billion in cash and access to a $3 billion credit facility, said it appointed Citi (C.N), Evercore (EVR.N) and Lazard (LAZ.N) as financial advisers and was finalising a bridge loan facility of about 3 billion pounds.

($1 = 0.6301 pound)

Reporting by Daryl Loo in London and Ilaina Jonas in New York. Editing by Dan Lalor, Sinead Cruise, David Hulmes and Robert MacMillan

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