Mergers & Acquisitions and Public Companies and Shopping Centers and Simon Property Group and Real Estate & Retail

Simon may drop interest in Capital Shopping Centres

December 8, 2010

Indianapolis-based Simon Property Group Inc. will end its interest in buying Capital Shopping Centres Group Plc if the U.K. company doesn’t provide information necessary to evaluate a bid. Capital Shopping fell as much as 4.7 percent in London trading.

“By declining to provide us with the requested limited due diligence information, you have constrained the exploration of an opportunity to benefit your shareholders,” Simon said in a letter to Capital Shopping included in a statement Wednesday.

Simon, the largest U.S. mall owner, said last month it was considering an unspecified cash bid worth more than Capital Shopping’s net assets. Capital Shopping rejected a request from Simon to delay selling shares and buying the Trafford Centre mall in northwest England, a move that would have given the U.S. company more time to prepare an offer.

“I think it’s a done deal,” Graham Jones, an analyst at Arbuthnot Securities Ltd., said today by telephone. “Capital Shopping will press ahead and Simon will disappear off the share register.” Jones doesn’t have a rating on the stock.

Capital Shopping shares had the biggest decline in two weeks. They were down 15.6 pence, or 3.8 percent, at 392.4 pence at 9.59 a.m., reducing the company’s market value to 2.7 billion pounds ($4.2 billion).

Michael Sandler, a spokesman for Capital Shopping, declined to comment. In a Nov. 24 statement, the company announced a plan to buy the Trafford Centre from closely held Peel Group for 1.6 billion pounds in stock and assumed debt. The total purchase price would be the highest ever paid for a British mall.

“If the proposed Trafford Centre acquisition is approved, we would need to consider liquidating our position in CSC,” Simon said in its letter. The company has a 5.1 percent stake in London-based Capital Shopping, Britain’s biggest mall owner.

Simon said the U.K. company is “substantially overpaying” for the mall in a transaction that would give Peel a stake of as much as 25 percent in Capital Shopping. Investors are scheduled to vote on whether to approve the transaction on Dec. 20.

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