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Capital hits headwinds in Trafford bid

Johannesburg - US-based Simon Property Group, which owns 5% of Capital Shopping Centres Group, said on Wednesday that it will vote against CSC's planned acquisition of the Trafford Centre Group at the forthcoming extraordinary general meeting (EGM).

In a letter to the board of CSC, Simon Property Group chairperson and CEO David Simon urged CSC to reconsider the proposed acquisition.

"We firmly oppose the proposed transaction and, as the owner of more than 5% of Capital Shopping Centres Group PLC's share capital, will vote against it at the forthcoming EGM. We strongly encourage all other CSC shareholders to do the same," Simon said.

He said that Capital had been asked to "pause before proceeding headlong into ceding significant control to Peel without obtaining any premium to CSC's latest stated NAV (net asset value)."

Simon said his firm had analysed the proposed deal and it was "even more disturbed and disappointed by the profound value destruction proposed to be inflicted on CSC and its shareholders" .

Simon Property said it believes CSC is substantially overpaying for the Trafford Centre Group, and that the proposed acquisition would diminish CSC shareholder value.

"CSC is transferring significant control to Peel, while failing to extract a premium for it, and is issuing equity to Peel at a discount to CSC's latest stated NAV; and the £1.6bn Trafford Centre transaction is cash negative to CSC by £29.6m on an annual pro forma basis, taking the entire transaction into account," Simon said.

Simon Property said it had urged CSC to allow it the opportunity to review limited and specific due diligence information with respect to CSC, which would help it formulate an acquisition proposal to give CSC and its shareholders a better alternative to the Trafford Centre purchase.

"By declining to provide us with the requested limited due diligence information, you have constrained the exploration of an opportunity to benefit your shareholders. If the proposed Trafford Centre acquisition is approved, we would need to consider liquidating our position in CSC," it concluded.

The Peel Group currently holds 0.3% of CSC's shares, Donald Gordon owns 13.3%, other South African investors - including Coronation Fund Managers, Public Investment Corporation, Investec Asset Management, Sanlam Investment Management, Old Mutual Asset Managers and Foord Asset Management - jointly hold 28.8%, Simon Property owns 5.1% and there is a 52.4% public float.

The proposed acquisition - for £747.6m  - values the Trafford Centre at £1.6 bn. The acquisition involves an equity purchase price of £747.6m for the Trafford Centre, and a further amount of about £77m in respect of a cash contribution by Peel, in return for the issue of consideration shares and convertible bonds by CSC to Peel.

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. With more than 230 units, it has strong anchor clients including Selfridges, Debenhams, John Lewis and Marks & Spencer.

The acquisition is subject to the approval of CSC's shareholders at an EGM which is expected to be held on December 20. CSC CEO David Fischel told a presentation earlier this week that the Gordon family is supportive of the transaction.

If approved, the acquisition is expected to be completed by December 22.
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