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CSC turns US funding proposal down

Johannesburg - Capital Shopping Centres (CSC) has rejected the alternative funding proposal by US-based Simon Property Group (SPG) and is reiterating its recommendation that shareholders vote in favour of the Trafford Centre acquisition at the extraordinary general meeting (EGM) to be held on December 20.

Simon said in a letter to CSC's Board at the weekend that it considers its proposal to be more attractive for CSC shareholders than the transaction which the board of CSC has recommended that shareholders support at the EGM.

SPG said it would be prepared to subscribe, subject to a clawback, for fully diluted issue of 205.5 million new ordinary shares at a price of 400p per share, representing a 9.0% premium to Peel's blended share price of 367p per share, as well as a 6.1% premium to net asset value (NAV).

The issue would comprise 153.3 million new ordinary shares, together with 209 million of convertible bonds (the same amount as would be issued to Peel), convertible into 52.2 million ordinary shares, for which we would be prepared to accept the same coupon as Peel despite the higher conversion price of 400p.

In terms of the current proposal for Trafford Centre, CSC proposes to issue up to 224.1 million new ordinary shares on a fully diluted basis, 20.9 million of which will be issued at 355p per share, and 203.2 million shares issued at 368p per share, or a blended share price of 367p. This represents a 2.7% discount to NAV per share of 377p.

In its response, CSC said it considers that what SPG is suggesting is "incapable of implementation and completely impracticable."

"The CSC Board notes that, by making this proposal, SPG is now recognising the strategic importance of the Trafford Centre as a future part of CSC's portfolio," it said.

Peel has reiterated to the CSC board its consistent view that it wishes to remain invested in UK regional shopping centres and does not wish to sell the Trafford Centre for cash as SPG is suggesting. Peel's stated objective remains to be a long-term supportive shareholder in CSC as part of Peel's overall strategy of investment diversification.

The CSC board has reviewed what SPG proposes and notes that it would provide SPG with a holding of between approximately 18.4% and 26.9% in CSC, together with a seat on CSC's board.

"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. The CSC board continues to believe it is in CSC shareholders' best interests to proceed with the acquisition on the terms agreed with Peel which represents a compelling transaction of significant benefit to CSC shareholders," it said.
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