Simon says… LOL | FT Alphaville

Simon says… LOL

The bid battle for Capital Shopping Centres has taken a slightly farcical turn on Friday morning, with the UK’s largest mall operator claiming it’s worth 50 per cent, or £2bn, more than its current market quote.

From the RNS:

The Board of CSC has identified significant incremental value opportunities which imply a total potential net asset value of 536 pence per CSC share following the Revised Acquisition. In addition, DTZ has independently identified a further potential 89 pence per share of value that they believe would be appropriate for a purchaser of the portfolio as a whole to pay, given the unique and strategic nature of CSC’s shopping centres. This corresponds to a potential net asset value of up to 625 pence per CSC share.

CSC shares are currently changing hands at 418p.

As a reminder, Simon Property Group, the US real estate company, has until next Wednesday to make a formal offer for CSC, owner of the Lakeside and Cribbs Causeway shopping centres.

It has already had an indicative 425p a share offer knocked back by the board of CSC and will probably be having a chuckle at today’s statement.

Analysts, such as Alan Carter, of Evolution Securities already are:

CSC has now come out and said that its NAV could be 625p per share!!!!!!

This is achieved through:

1. a small revaluation uplift of the portfolio and a higher revised price at which it will issue equity to Peel for Trafford

2. Adding back Stamp Duty of 4% on the portfolio which SPG would not be required to pay by buying the assets through corporate acquisition, but would have to pay if it bought the assets in the market. That’s worth 29p.

3. IF CSC’s portfolio were to revalue to its mid-cycle average over the last ten years…….oh please……….that’s worth 87p apparently

4. Portfolio opportunities which would create 30p of value…er right

5.The unique portfolio is worth a premium of between 12.5% and 16% cos it’s unique. That’s worth 89p

So there you have it. We all thought it was worth maybe 450p max, against a stated NAV of 375p. Turns out the company’s worth over £2bn more than anyone thought. Grief.

Simon may well walk away in the face of this…………..which will give us a great chance to see how quickly the company can create this £2bn that has really been there all the time.

And that should give us all another laugh.

Update: 10.26am (GMT)

Market professionals also think the revised Trafford Centre acquisition is also something of a joke. The terms of the deal have not changed and effective control of the company is still being given to John Whittaker’s Peel Holdings. Stranger still is the fact that CSC is now issuing paper to Whittaker at 400p a share (up from 368p previously) even though the shares are actually worth 625p a share.

For Olivetree Securities this is all evidence that CSC is not for sale at any price.

The language used to describe the potential Simon offer is hugely aggressive and to us shows that management have no interest whatsoever in selling out.

Feedback we have had from (particularly South African) shareholders suggests a large swathe of the shareholder base has no interest in selling for anything other than a ludicrous price, and management clearly know this. CSCG claim that Simon’s current offer “very substantially undervalues” the company – suggesting a “normal” bump of 10-15% would be insufficient.

Indeed they have gone to the bizarre lengths of asking an independent to opine that there is a further 89p of value for the “unique and strategic nature” of its assets to any potential buyer – surely something shareholders should be deciding for themselves

Unless Simon can come up with a left-field structure to persuade South African shareholders to participate at a price meaningfully lower than CSCG’s self-valuation, we just can’t see how this ends up being bought.


Related links:
CSC tells Simon to come back with a proper offer – FT Alphaville
Simon says, we’ll bid for Capital Shopping Centres… – FT Alphaville
Simon says… how about this for a screeching U-turn? – FT Alphaville
Simon Property Group goes shopping – FT Alphaville