Possible Simon bid boosts British mall owner's stock

Back to TopCommentsE-mailPrintBookmark and Share

Shares of Capital Shopping Centres Group Plc, Britain’s biggest mall owner, rose the most since the company went public in 1992 after saying Indianapolis-based Simon Property Group Inc. may offer more than 2.3 billion pounds—or $3.6 billion—in cash for the company.

The stock advanced 13 percent in London. Simon, which owns 5.6 percent of the company, indicated in a letter Wednesday that it’s considering making an offer, CSC said in a statement. Les Morris, a spokesman for Simon in Indianapolis, said he had no comment.

Simon, the largest U.S. mall owner, paid $2.3 billion this year for an outlet-center business and has plenty of capital for more purchases, CEO David Simon said at an investors conference Nov. 16.

“We still have a significant amount of firepower to do value-added transactions for the company,” Simon said at the REITWorld conference hosted by the National Association of Real Estate Investment Trusts in New York. “The one thing we will not do is do a deal just to do a deal.”

Simon Property, the largest owner of U.S. malls, bought Prime Outlets Acquisition Co. in August, expanding its outlet retail operation. The company had $1.3 billion of cash and $3 billion availability on a corporate credit line at Sept. 30.

CSC disclosed Simon’s intentions while announcing an agreement to buy the Trafford Centre mall near Manchester, England, from closely held Peel Group for 747.6 million pounds in stock and bonds and 852 million pounds of assumed debt. To help with financing, CSC raised 221.2 million pounds from selling the equivalent of 9.9 percent of its equity outstanding to investors Thursday. CSC said it rejected Simon’s request to delay the purchase and share sale.

Simon’s approach “may start a Dutch auction for the business,” Robert Duncan, a London-based analyst at Nomura International Plc with a “reduce” rating on the stock, said in a note to investors.

Simon said it would pay more than London-based CSC’s net asset value if it made an offer, though it didn’t indicate a price, according to Capital Shopping. The British mall owner’s net asset value was 368 pence a share on June 30 and it had about 629.3 million shares outstanding before Thursday’s stock sale.

The stock gained 43.6 pence to 381 pence, valuing the company at about 2.4 billion pounds.

“Any hostile cash bid would have to be at about a 20 percent-plus premium, suggesting a possible start point for negotiations of 450 pence,” Duncan said.

CSC’s other shareholders include Westfield Group, the world’s largest owner of shopping centers. The Australian company disclosed a stake of about 3 percent in August 2008, a week after Simon bought almost 3.5 percent of CSC.

Investors who didn’t participate in the share sale will have their holdings diluted by about 30 percent when the transaction is completed, Duncan said.

CSC sold 62.3 million shares, which will start trading Nov. 30, at 355 pence each, according to a statement. That was 3.5 percent less than its net asset value June 30 and 5.6 percent lower than its pro-forma net asset value Nov. 1, calculated as if the transaction had completed. The proceeds exclude costs and fees. Merrill Lynch and UBS AG managed the sale.

CSC is issuing 155.3 million new shares to Peel at 368 pence each and as many as 12.3 million at the share-sale price. Peel will also receive convertible bonds with an aggregate value of 209 million pounds.

Peel will own 19.9 percent of CSC when the deal is completed, making it the largest shareholder. Its holding would rise to 24.9 percent assuming full conversion of the bonds. CSC investors will vote Dec. 20 on whether to approve the deal.

John Whittaker, Peel’s billionaire owner, will become deputy chairman of CSC. He faces restrictions on selling his CSC shares for five years, according to a presentation on the company’s website.

Including the assumed debt, the Trafford Centre deal represents the highest price paid for a single U.K. property. The mall has 1.9 million square feet of space and attracts more than 35 million visitors a year.

With the purchase, CSC will own four of the seven biggest U.K. shopping centers, the company said on the website, citing Property Market Analysis.

The transaction marks the first time full ownership of one of the U.K.’s 10 biggest malls will change hands since 1999. British Land Co. bought the Meadowhall shopping center in northern England in November 1999 for 1.17 billion pounds in cash and assumed debt. It sold a 50 percent stake in February last year for 588 million pounds, of which 170 million pounds was cash.


  • Quality not Quantity
    ENOUGH !! Simon spent a fortune trying to buy the Chicago based mall company last year and before that Taub shopping centers. As soon as they hear "Simon" shareholders think they are going to bleed Simon dry. This is going to make lots of international lawyers happy as England fights the sale after the Kraft-Cadbury mess. David, focus on quality not quantity and make sure your US properties are occupied, clean, and safe.

Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. These liberals are out of control. They want to drive our economy into the ground and double and triple our electric bills. Sierra Club, stay out of Indy!

  2. These activist liberal judges have gotten out of control. Thankfully we have a sensible supreme court that overturns their absurd rulings!

  3. Maybe they shouldn't be throwing money at the IRL or whatever they call it now. Probably should save that money for actual operations.

  4. For you central Indiana folks that don't know what a good pizza is, Aurelio's will take care of that. There are some good pizza places in central Indiana but nothing like this!!!

  5. I am troubled with this whole string of comments as I am not sure anyone pointed out that many of the "high paying" positions have been eliminated identified by asterisks as of fiscal year 2012. That indicates to me that the hospitals are making responsible yet difficult decisions and eliminating heavy paying positions. To make this more problematic, we have created a society of "entitlement" where individuals believe they should receive free services at no cost to them. I have yet to get a house repair done at no cost nor have I taken my car that is out of warranty for repair for free repair expecting the government to pay for it even though it is the second largest investment one makes in their life besides purchasing a home. Yet, we continue to hear verbal and aggressive abuse from the consumer who expects free services and have to reward them as a result of HCAHPS surveys which we have no influence over as it is 3rd party required by CMS. Peel the onion and get to the root of the problem...you will find that society has created the problem and our current political landscape and not the people who were fortunate to lead healthcare in the right direction before becoming distorted. As a side note, I had a friend sit in an ED in Canada for nearly two days prior to being evaluated and then finally...3 months later got a CT of the head. You pay for what you get...