Simon Property Group attacks CSC’s Trafford Centre bid
US PROPERTY giant Simon Property Group is urging Capital Shopping Centre’s (CSC) shareholders to vote down its £1.6bn Trafford Centre bid.
It has also called for the firm’s management to open its books to allow Simon to prepare a bid “that would afford CSC and its shareholders with a superior alternative to the Trafford Centre acquisition”.
This morning, Simon Property Group has published the contents of a detailed letter sent to the CSC board spelling out its frustration at CSC’s refusal to halt the Trafford Centre deal and to provide it with access to accounts to allow for a bid that would be “at a premium” to CSC’s net asset value.
Simon said it was “disturbed and disappointed by the profound value destruction proposed to be inflicted on CSC and its shareholders” by pursuing the deal.
CSC had said that the Trafford Centre deal would initially be earnings neutral and would not damage its net asset value. However, Simon Property Group argues in its letter that the £1.6bn deal not only transfers significant control of the CSC’s affairs to Peel, and does so at a discount.
It also said that the deal would be “cash negative” to CSC, sucking out £29.6m a year in interest and additional dividend payments due to the “high cost” of the £800m worth of Trafford Centre debt that was being assumed.
Simon Property Group said that a Wall Street Journal Online story published earlier today which stated the firm was likely to abandon its bid in frustration at not being given access to CSC’s books “does not accurately reflect its position”.
“Simon remains willing to consider making acquisition proposals,” the letter stated.
“If, however, the CSC board were to state that it will not provide any due diligence materials to Simon, Simon would have no alternative but to terminate its approach”.
It also argued that would consider selling its own 5% stake in the company.
CSC responded by stating that Simon Property Group has not made any indicative offer for the business, so it was “not appropriate” to divulge the non-public information it was seeking.
It also defended the rationale for the Trafford centre deal.
“The Board believes that the Trafford Centre acquisition is a compelling transaction of significant benefit for CSC shareholders. The acquisition is consistent with CSC’s objective post-demerger of creating a pure, high quality UK regional shopping centre REIT which is attractive to investors and vendors of assets.
“The Board is confident that CSC’s portfolio, built up over 30 years and enhanced by the acquisition of the Trafford Centre, will deliver outstanding shareholder returns as the property sector continues to recover.”
CSC argued that Simon’s letter was “selective” and did not accurately represent the terms of the deal.
“The overall transaction is expected to have a neutral impact on earnings per share in the first full year and on NAV per share.”
It said the Trafford Centre’s securitised debt was an “attractive component” of the deal as it lengthened the average debt maturity date in its portfolio, adding that its amortisation would not have an impact on cashflow, nor would dividends be unduly affected.
“The board continues to believe it is in shareholders’ best interests to proceed with the acquisition,” it said.
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