Shopping mall giants poised to do battle for Liberty

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Liberty International, the owner of Covent Garden in London, was once more the focus of takeover talk yesterday after two international shopping mall giants built significant stakes in the UK-listed property group.

Simon Property Group, based in the US, has boosted its holding in Liberty for the second time in a week from 3 per cent to 4.22 per cent, with industry sources expecting more to come.

Meanwhile, Australia's Westfield Group revealed it had taken a 2.96 per cent stake in Liberty.

The news sent Liberty's shares up 5 per cent, or 50.5p, to 995.5p, as traders said that speculation over a takeover had been growing since last week.

Liberty International declined to comment on the moves by its rivals or potential takeover speculation.

The Independent revealed in March that talks had taken place concerning Liberty's future, possibly including Westfield, over a deal to create the world's largest shopping mall group. Nothing has publicly emerged since, as the property sector continued to suffer in the wake of the credit crunch.

Westfield, which puts out its half-year numbers today, said yesterday it had built up the position in Liberty between June and July, for an average price of 853p per share, which values its investment at £91m.

One industry source said that Westfield's decision to announce was "macho posturing" from its chief executive, Frank Lowy, in the wake of the announcement from its rival Simon Property. "He's saying to David Simon: 'Anything you can do...'."

The US group's move prompted one analyst to say: "One possible way of looking at this is that Simon Property's stake is not a short-term transaction and may, eventually, result in a takeover bid."

The group notified the market of its second transaction yesterday, just five days after it had first lifted its initial holding, which sent the group's share price soaring 8 per cent.

The JP Morgan analyst Harm Meijer said that Simon Property's stake-building should be taken seriously. "It may be that as a result, other shopping centre players, such as Westfield, consider building a stake too," he said. And so it proved shortly after.

Mr Meijer continued: "Not much detail is known, but the stake-building underpins our view that UK property stocks own generally high quality assets with long-term value creation prospects."

Mr Meijer believes Simon Properties is well placed to make an approach, saying JP Morgan economists believe the dollar has further to rise against sterling, Simon's management is well regarded in the industry, and it has a strong balance sheet and "may see strong value creation opportunities in Liberty's portfolio".

He added that Simon Properties might see it as the best way into the UK, while Liberty "needs a new strategy and Simon Properties' move may fit in this".

Sir Donald Gordon, Liberty's life president, is understood to hold the key to any transaction, as his family has a 21 per cent stake in the group, and until he retired he was resistant to a sale.

Sources close to Liberty poured cold water on the idea of the group being taken over, and they said the group had not called in banking advisers to defend against a potential offer.

Veteran property mogul Sir Donald holds key to deal

Whenever takeover speculation emerges in Liberty International, the first question has to be: "What does Sir Donald Gordon think?" The group's life president, along with his family, holds a 21 per cent stake in the group, and without his approval no potential bid will advance beyond the opening pleasantries.

Sir Donald established Liberty International in 1980 as the UK operation of Liberty Life Association of Africa, initially under the name of Transatlantic Insurance Holdings. Sir Donald, who trained as a chartered accountant, had set up Liberty Life in South Africa, a life assurance business, in 1957, with the company moving into property investment in the 1990s. He retired from Liberty Life in 1999 and from Liberty International in 2005, when he was appointed life president of the group.

The company owns shopping centres across the UK, including Lakeside in Thurrock, Essex, and the MetroCentre in Gateshead. He had in the past put the price of his exit at 1,500p a share, and has been unwilling to sell, but he may have softened his position as he comes up to his 80th year.

Nick Clark

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