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Simon Abandons CSC Bid

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With tomorrow's deadline looming to make a bid for Capital Shopping Centres, Simon Property Group announced this morning that it was ending its pursuit of the British mall owner.

Text of its release is below:

On December 15, 2010 Simon announced an indicative offer of 425p for CSC's entire share capital (less any dividend declared, made or paid after that date). Access to satisfactory due diligence from CSC is the only non-waivable outstanding precondition to Simon announcing a firm offer. If a firm offer were to be announced, it would be subject to a number of conditions including a non-waivable condition relating to the Trafford acquisition not proceeding. Despite numerous overtures from Simon and in full knowledge that Simon, given this due diligence precondition, is not able to announce a firm offer without it, the CSC board has refused to share any due diligence information with Simon. Simon therefore has no alternative other than to announce that it does not intend to make an offer for the entire share capital of CSC, and CSC shareholders are unfortunately thereby deprived of the option to sell their shares pursuant to such an offer.

On January 7, 2011, CSC announced revised terms for its proposed acquisition of the Trafford Centre. It is readily apparent that the CSC board revised the terms of the Trafford acquisition in response to pressure from Simon, despite having initially expressed unwillingness to contemplate revising the terms of the transaction. The revised terms do not address Simon's fundamental concerns and the transaction remains deeply unattractive for CSC shareholders:

  • The CSC board is still proposing to relieve the owner of the Trafford Centre of a potential tax liability of more than £300 million and to transfer significant control of CSC to Peel at a discounted price.
  • The purchase price for the acquisition of the Trafford Centre is still too high.
  • The transaction is still cash flow negative by c. £27 million on an annual pro forma basis reducing dividend and cash flow coverages.
  • Existing CSC shareholders are still not being given the opportunity to participate in the discounted share issue and suffering a further dilution of their holdings in a company that had 376 million ordinary shares outstanding on a fully diluted basis in May 2008, but will have 897.5 million shares outstanding on a fully diluted basis if the Trafford transaction is completed on the revised terms, an astonishing increase of nearly 140%.

As Simon also announced on January 7, 2011, the CSC's board's belief in “potential net asset value of up to 625p [per CSC share]” represents, in Simon's view, wishful thinking and was designed to frustrate Simon's offer. If the CSC board really believes in this potential value, why are they proposing to issue 33% of the company's existing shares to Peel at a price of 400p, thereby diluting existing shareholders?

Simon therefore continues to oppose the value-destructive Trafford Centre transaction and urges its fellow CSC shareholders to vote against it at the CSC EGM on January 26, 2011. Simon reserves the right to sell some or all of its existing holding in CSC and/or to acquire, and/or to offer to acquire, CSC shares or interests in CSC shares, subject to Simon and its concert parties not increasing their holding in CSC to more than 29.9% of CSC's share capital. For the purposes of Rule 2.8 of the Code, Simon reserves the right to make or participate in an offer for CSC (and/or take any other action which would otherwise be restricted under Rule 2.8 of the Code) within the next six months following the date of this announcement: (i) with the agreement or recommendation of the Board of CSC; (ii) following the announcement of an offer by or on behalf of a third party for CSC; (iii) following the announcement by CSC of a “whitewash” proposal (for the purposes of

Note 1 on the Notes on Dispensations from Rule 9 of the Code) or a reverse takeover (as set out in Note 2 on Rule 3.2 of the Code); or (iv) if there is a material change of circumstances.

Simon currently holds 5.11% of CSC's issued share capital or 35,355,794 shares in total.

Capital Shopping Centres acknowledged the announcement with a brief release of its own that continues to support its proposed Trafford Centre offer.

So it looks like this particular saga has come to close. Where will Simon's attentions turn now?

For previous stories, check the links below.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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