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CSC to acquire Trafford Centre Group

Johannesburg - Listed UK property company Capital Shopping Centres Group said on Thursday that it has reached an agreement with Tokenhouse Holdings, one of the holding companies of the Peel Group, under which it will acquire The Trafford Centre Group together with approximately £77m in cash from Peel.

In exchange CSC will issue to Peel up to 167.3 million new ordinary shares in CSC and an aggregate nominal amount of up to £209m 4.076% convertible bonds to be issued by CSC.

CSC also announced that it is placing up to 62.3 million new ordinary shares, representing up to 9.9% its existing shares immediately prior to the placing, with institutional and certain other investors through an accelerated Bookbuild process to be carried out by Merrill Lynch International and UBS Limited. The price will be determined at the close of the Bookbuild, which opens with immediate effect.

The Trafford Centre, located near Manchester, is one of the UK's most successful retail and leisure destinations attracting 35 million customer visits annually. It has 1.9 million square feet of retail, catering and leisure space, including approximately 0.2 million square feet at Barton Square, a major homeware and leisure extension.

The acquisition involves an equity purchase price of £747.6m for The Trafford Centre and a further amount of approximately £77m in respect of a cash contribution by Peel, in return for the issue of consideration shares and convertible bonds by CSC to Peel.

On the basis of CSC's 30 June 2010 Net Asset Value per share of 368 pence, the acquisition implies a price for The Trafford Centre of approximately £1.60bn, taking into account The Trafford Centre Group's net debt of £798m, which mostly comprises long-dated amortising CMBS notes, and other net liabilities of £54m at 30 June 2010. This represents a 3% discount to the 1 November 2010 external valuation of £1.65bn.

The acquisition will strengthen CSC's position as the leading operator of pre-eminent UK regional shopping centres.  After the acquisition, CSC will own 14 UK shopping centres, including ten of the top 25 and four of the top six out-of-town shopping centres.

It will also significantly increase CSC's presence in the key North West regional market, alongside Manchester Arndale and strengthen retailer relationships, add The Trafford Centre's successful leisure and catering offerings and provide an opportunity to combine best practices across CSC and The Trafford Centre.

The deal also provides significant asset management opportunities to grow ERV at The Trafford Centre and further enhance the overall financial position of the enlarged group with the addition of The Trafford Centre's high-quality income stream and long-dated CMBS debt.

The acquisition will result in Peel holding approximately 19.9% of CSC's enlarged issued share capital (and approximately 24.9% assuming conversion of the Convertible Bonds). John Whittaker, Chairperson of Peel and a highly regarded real estate investor, will join the Board of CSC as a Non- Executive Director and Deputy Chairperson.

The placing strengthens the overall financial position of the group, reducing the loan to value ratio from 53% to approximately 47%, and increases the group's flexibility to invest further in its existing key assets, it said.

Following the acquisition and placing, after funding certain items arising as a result of the acquisition, the enlarged group is expected to have headroom in terms of cash and committed facilities of approximately £360m.

The acquisition is subject to the approval of CSC's shareholders at an Extraordinary General Meeting which is expected to be held on 20 December 2010.

Commenting on the transaction, Patrick Burgess MBE, Chairperson of CSC, said this is a  significant transaction which represents an outstanding opportunity for shareholders. "We are looking forward to welcoming Peel as a major shareholder and to benefiting from John Whittaker's expertise on the board of Capital Shopping Centres Group PLC. The Trafford Centre is an exceptional asset which will be an important component of the Group's long term future prospects. In addition, the Placing will substantially strengthen the Group's financial position to the benefit of all shareholders."

David Fischel, CEO of CSC, said: "The transaction fits well with the strategy of establishing CSC as the leading developer, owner and manager of pre-eminent UK regional shopping centre destinations and the Placing improves the Group's financial flexibility to pursue the range of active management projects under consideration. We look forward to working with John Whittaker and The Trafford Centre team and to strongly driving forward the Group's overall performance."

John Whittaker, Chairperson of Peel, said: "The prospect of blending The Trafford Centre with the Capital Shopping Centres portfolio is very exciting. Capital Shopping Centres is widely regarded as the leading owner and operator of pre-eminent UK regional shopping centres and through Peel's investment of equity, assets and expertise we hope to assist in taking the Company forward to new heights.
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