Tempers fray in row over shops complex

Capital Shopping Centres (CSC), which owns Essex's Lakeside centre, described the latest plan from Simon Property Group, which is also one of its biggest shareholders, as "completely impracticable".

CSC has been locked in a row with Simon after it offered 1.6bn to buy the Trafford Centre from Peel Holdings, giving the company controlled by billionaire John Whittaker nearly 20 per cent of its shares.

The 1.9 million-square-foot Trafford Centre draws about 35 million customers a year but Simon objected to the deal, saying Capital has offered too much money and would dilute its value by giving away so many shares.

The US firm, which earlier expressed an interest in buying CSC but was denied access to its accounts, has now suggested an alternative deal that would see CSC raise cash from its shareholders to pay Peel.

Simon has offered to buy shares at a higher price than Peel to help Capital raise some of the money, a move that would see Simon own between 18.4 per cent and 26.9 per cent of Capital's shares, depending on how much other shareholders put in, but analysts dismissed the plan as "seemingly impossible".

CSC issued a statement in an exasperated tone, saying that Simon's deal was impractical because Peel wanted to become a shareholder and remain an investor in regional shopping malls. It urged shareholders to vote in favour of the Trafford centre deal at the extraordinary general meeting on Monday.

The transaction was announced last month and would give Peel, controlled by UK billionaire John Whittaker, a 19.9 per cent stake in CSC.

In an open letter to Capital chairman Patrick Burgess, Simon's executive chairman David Simon said his company had spoken to other shareholders who shared its concerns about the bid.

He added that his earlier offer to open discussions about buying Capital remained on the table.

CSC's statement said Simon's proposal did not provide "a genuine alternative" for its shareholders.

The existing terms are "a compelling transaction of significant benefit to CSC shareholders", it added.

It could not alter the terms of a legally binding agreement with Peel, it said, but was encouraged that Simon had recognised the strategic importance of the Trafford Centre as a future part of its portfolio.

"What SPG proposes does not provide a genuine alternative for CSC shareholders.

"The CSC board continues to believe it is in CSC shareholders' best interests to proceed with the acquisition on the terms agreed with Peel which represents a compelling transaction of significant benefit to CSC shareholders."

Peel said it had no wish to sell the Trafford Centre for cash, even though a deal could achieve a higher price, and instead wants to increase its exposure to the British shopping centre market.

"The transaction will bring to CSC the value of John Whittaker's extensive experience in the retail and leisure property sectors," according to Peel.

CSC owns 13 regional shopping centers amounting to 14.1 million sq ft of retail space. It has four major out-of-own centers including Lakeside in Thurrock, Metrocentre in Gateshead; Braehead in Glasgow and The Mall at Cribbs Causeway, Bristol, and nine in-town centers including the prime destinations in Cardiff, Manchester, Newcastle, Norwich and Nottingham.

The acquisition of the Trafford Centre would mean CSC owns four of the top six out-of-town shopping centres.

Last week Simon said it opposed the Trafford deal, claiming it was value destructive, could undermine CSC's ability to pay future dividends and meant future operating cashflows might not be available for distribution to shareholders.

Simon owns or has an interest in 373 retail real estate properties, including regional malls, premium outlets, community and lifestyle centers and international properties making up 256 million sq ft of gross leasable area in North America, Europe and Asia.

Shares in CSC had inched up to 390.50p at the close of trading.

Deal is 'seemingly impossible'

Analysts took a cool view of shares in Capital Shopping Centres (CSC).

John Cahill, analyst at Evolution Securities, said: "The Simon Group takeover moves from unlikely to seemingly impossible. Most curious is the Simon Group's position on the Trafford Centre purchase price. Formerly it was a barrier to Simon Group making a takeover proposal for the entirety of CSC, yet now is a deal that Simon is proposing to finance itself."Evolution slapped a "sell" rating on CSC.

Credit Suisse said there was "little reason to chase" CSC shares and said a "better explanation" was needed of why investors would benefit from a deal with either Peel Holdings or Simon.