CSC revises Trafford Centre offer
Published: 07 January, 2011
CSC insists Simon Property Group's indicative offer 'substantially undervalues' the company.
Capital Shopping Centres has revised the terms of its £1.6bn offer for the Trafford Centre. It is now proposing to offer owner Peel Holdings 205.9m shares at 400p each, rather than 224.1m shares at 368p per share. The price being paid for the centre remains the same but the change will result in Peel owning 23.2 per cent of CSC's enlarged share capital rather than 24.7 per cent under the previous arrangement.
The move reflects the recent surge in CSC's share price and also goes some way towards meeting Simon's complaint that the deal leaves Peel holding too large a stake in CSC.
At the same time the CSC board has issued a detailed rebuttal of Simon's criticisms. It has identified a series of asset management opportunities which it says will drive its net asset value potentially as high as 536p per share. At the same time CSC has commissioned a valuation from DTZ, looking at the premium that might by justified by the unique and strategic nature of CSC's shopping centre portfolio. DTZ put a figure of 89p per share on this implying, according to the CSC board, that the company could be worth 625p per share against Simon's indicative offer of 425p per share.
In a stock exchange announcement CSC said: “The board believes that CSC, having come through an economic period which has proved difficult for the entire UK property sector, is now strongly positioned for income and value growth which will be to the benefit of all shareholders. The board considers that the indicative proposal very substantially undervalues CSC and its prospects and recommends that shareholders vote in favour of the Trafford Centre acquisition, now on revised terms, at the forthcoming adjourned EGM scheduled for 26 January 2011.”
Simon countered by welcoming the reduction in Peel's potential stake, but asked: "If the CSC board really believes in 'potential net asset value of up to 625p', why are they proposing to issue 33 per cent of the company's existing shares to Peel at a price of 400p, thereby diluting existing shareholders?"
Peel threw its weight behind CSC with a statement of its own. Chairman John Whittaker said: “CSC has 13 prime UK shopping centres with considerable untapped growth opportunities. I believe the existing NAV of CSC does not reflect the latent value that can be unlocked through, amongst other things, improving rental income, increasing square footage and adding leisure, catering and focus on customer ambience.
“The re-pricing of this transaction reflects my strong belief in the growth yet to come at CSC. By combining the extensive experience of the Peel and CSC teams in managing UK regional shopping centres we believe CSC will be well placed to realise this potential.
