Commercial Real Estate and Mergers & Acquisitions and Public Companies and Simon Property Group and Project Funding and Real estate deals and Real Estate & Retail

Simon target's valuation 'out of reach' for Indianapolis firm

January 7, 2011

Capital Shopping Centres Group Plc, the U.K.’s biggest shopping mall owner, said it is worth as much as 625 pence ($9.64) a share to a bidder, almost 50 percent more than an offer from Indianapolis-based Simon Property Group Inc.

That valuation includes 89 pence a share that a bidder such as Simon should pay to reflect “the unique and strategic nature of CSC’s shopping centers,” the London-based company said in a statement Friday. It also takes into account Capital Shopping’s planned acquisition of the Trafford Centre mall in Manchester, England.

Last month, Simon made a conditional offer of 425 pence a share, valuing Capital Shopping at 2.9 billion pounds. The bid, which Capital Shopping has said is inadequate, was 13 percent higher than the U.K. company’s net asset value of 377 pence a share as of Nov. 1. It depends on Capital Shopping abandoning the Trafford Centre agreement.

“This gets us into the realms of the comical now,” said John Cahill, an analyst at Evolution Securities in London. “Capital Shopping has obviously had to take Simon more seriously, but this 625 figure is very high and would put it out of reach of Simon.” Cahill has a “sell” rating on Capital Shopping, which is unrelated to the bid, he said.

Capital Shopping was little changed in London trading at 417.4 pence as of 10:33 a.m., valuing the company at 2.9 billion pounds. The stock has climbed 24 percent since closing at 337.4 pence on Nov. 24, the day before Simon’s interest in Capital Shopping was disclosed.

U.K. regulators last month gave Simon until Jan. 12 to announce an intention to make a formal offer. Simon said on Dec. 29 that it got a 3 billion-pound loan to help it bid for Capital Shopping. The U.K. landlord owns four of Britain’s 10 biggest malls, including the Manchester Arndale and the Lakeside Shopping Centre in Essex.

Capital Shopping also said Friday that it altered the terms of the Trafford Centre acquisition. The company will issue 18 million fewer shares to Peel Group, the owner of the Manchester mall, for 400 pence each. Capital Shopping previously priced the shares at 368 pence. As a result, Peel Group would have a maximum stake in Capital Shopping of 23.2 percent, rather than 24.7 percent.

The Trafford Centre “is the best shopping center in the U.K. outside of London and the southeast,” Capital Shopping Chief Executive Officer David Fischel said in an interview. “Next Wednesday is the so-called put up or shut up date for Simon.”

Simon’s current proposal is “completely inadequate,” and shareholders should approve the Trafford Centre purchase at a meeting on Jan. 26, Fischel said.

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