Simon offers alternative proposal to CSC board

By Daryl Loo and Ilaina Jonas

LONDON/NEW YORK (BestGrowthStock) – Simon Property (SPG.N: ) has pitched an alternative plan to help fund Capital Shopping Centres’ (CSCG.L: ) 1.6-billion-pound ($2.53 billion) UK mall acquisition, which it argues offers better terms while potentially lifting Simon’s stake in CSC up to 27 percent.

Simon, which now owns 5.1 percent of CSC, had last week objected to CSC’s plan to partly fund its purchase of the Trafford Center mall in Manchester with shares and convertible bonds that gives seller Peel Group a 19.

“If CSC is to proceed with the Trafford Center acquisition, financing that transaction on clearly better terms has to be in the company’s and its shareholders’ best interests,” David Simon, chairman of Simon Property, said in a letter addressed to CSC’s board.

CSC spokesman Michael Sandler declined to comment when reached.

Simon said in his letter that CSC, in its proposed deal with Trafford owner Peel Group, controlled by UK billionaire John Whittaker, plans to issue up to 224.1 million new shares on a fully diluted basis at a blended share price of 367 pence.

The letter, posted on Simon Property’s website, said CSC’s current offer overpays for Trafford and would be dilutive to CSC’s shareholders, and proposed an alternative that could raise Simon Property’s stake to at least 18.4 percent following a “clawback” option for other CSC shareholders.

SWEETENING THE OFFER

Excluding the clawback, Simon Property could end up with a 27 percent stake in CSC, a source familiar with the situation told Reuters, putting it just shy of a 30 percent shareholding that would trigger an offer under UK takeover rules.

Simon said it is prepared to subscribe for an issue of 205.5 million shares at 400p each, comprised of 153.3 million new shares and convertible bonds worth 209 million pounds, convertible into 52.2 million ordinary shares.

Its offer price represents a 6.1 percent premium to CSC’s net asset value, and is 9 percent higher than CSC’s offer to Peel, Simon said.

To further sweeten its offer, Simon Property said it is willing to accept certain “less favorable” terms compared to those offered to Peel, including not requesting for a deputy chairmanship on CSC’s board, and to hold on to CSC’s shares for a longer period than Peel.

Simon Property, which is being advised by Lazard and Citi, said its earlier proposal to make a potential cash offer for CSC at a premium to NAV, made late last month in a bid to block the Trafford deal, also remains on the table.

(Additional reporting by Ilaina Jonas; Editing by Jan Paschal)

Simon offers alternative proposal to CSC board