The bust-up over one of the UK’s largest property transactions continues.
Having said Capital Shopping Centres was “substantially overpaying” for the Trafford Centre, shareholder Simon Property Group performed a spectacular U-turn over the weekend.
Whereas last week SPG was threatening to dump its 5.1 per cent shareholding if the £1.6bn deal went ahead, it now says CSC should buy the shopping centre provided it uses a different financing structure — one that would give the US mall operator a dominant stake!
Simon says CSC should raise cash for the acquisition from existing shareholders. Specifically, CSC should place 205.5m shares and convertibles at 400p — a 6.1 per cent premium to net asset value — rather than issue 224m shares at a blended price of 367p to Peel Holdings, the vehicle selling the Trafford Centre.
But John Whittaker, the billionaire owner of Peel Holdings, sees things rather differently. He has no intention of selling the Trafford Centre for cash. He wants stock — which is being issued to him at a 2.7 per cent discount to net asset value (NAV).
From a Monday morning Peel Group press release:
Peel Group remains committed to the agreed transaction with CSC, subject to approval of CSC shareholders on 20th December 2010. Peel has no intention of selling the Trafford Centre for cash and this has never been an aim of the group – in spite of the fact that Peel has been advised a cash sale would achieve a higher price – and nor does Peel intend entering into such a discussion.
Rather, Peel’s stated objective is to increase and diversify its exposure to the UK shopping centre market via a long-term investment in CSC. The transaction will bring to CSC the value of John Whittaker’s extensive experience in the retail and leisure property sectors and, through the addition of the Trafford Centre, will create an unrivalled portfolio of UK regional shopping centre assets.
The transaction will bring to CSC the value of John Whittaker’s extensive experience in the retail and leisure property sectors and, through the addition of the Trafford Centre, will create an unrivalled portfolio of UK regional shopping centre assets.
So, CSC shareholders have a choice at the EGM on December 20th.
Back the existing Trafford deal and bring Peel on board. (If the deal goes ahead, Peel will emerge with 19.9 per cent stake and Whittaker will take a seat on the board).
Or reject it and hope that SPG makes a bid for the company, which for a number of reasons is unlikely to happen.
For one, CSC’s South African shareholders, which own around 25 per cent of the company, have no intention of selling out to SPG or anyone else for anything less than a massive premium. Indeed, the signs are they are likely to vote for the Trafford deal.
Second, SPG won’t make an offer unless CSC allows limited due diligence, something the board has already ruled out.
Third, it’s unlikely that SPG really wants to make an offer for CSC. Throughout this saga, its motivation has been to prevent Peel and Whittaker from taking de facto control of CSC.
Nothing it has said in the past few days makes that any less likely to happen. In fact, the screeching U-turn it performed at the weekend only makes SPG seem more desperate and confused.
Indeed, the only thing SPG can do to prevent the deal happening is to make a knock out cash offer.
Related links:
Simon says… the game is up – FT Alphaville
Simon Property Group goes shopping – FT Alphaville
CSC rebuffs fresh approach from Simon – FT