One of the UK's biggest shopping centre is in "advanced discussions" over a £1.6bn sale to a retail property group, marking another milestone for its billionaire owner, John Whittaker.
Capital Shopping Centres (CSC) yesterday confirmed it was in talks with Peel Group to acquire the Trafford Centre near Manchester. Under the terms of the deal, Lancashire-born Mr Whittaker, the chairman of Peel Group, would become CSC's biggest shareholder with 19.9 per cent.
The transaction would be another landmark in an eventful year for CSC, which owns 13 shopping centres including the Arndale, also in Manchester, and Lakeside in Essex.
CSC was established in May when the real-estate investment trust Liberty International split in two, which also led to the formation Capital & Counties Properties, the London specialist. If the deal goes ahead, CSC will fund it with £750m in shares for the Trafford Centre, which covers 1.9m square feet of retail space, and a further £75m cash contribution by Peel in return for it receiving new shares and convertible bonds.
CSC values the Trafford Centre's property assets at £1.65bn, including net debt of £750m and other liabilities of £50m. This implies a net initial yield of 5.01 per cent. The proposed acquisition price would represent a 3 per cent discount to this external valuation. Mr Whittaker will join the listed retail property developer's board as a non-executive deputy chairman.
His shareholding would rise to 24.9 per cent if he converted the convertible bonds that would form part of the deal. CSC confirmed it was in "advanced discussions with Peel in respect of the acquisition", but said "there can be no certainty that any final agreement" would be reached.
The company said it was also considering a placing of 9.9 per cent of its shares to raise funds and increase its "overall financial flexibility" and reduce its loan to value ratio to between 40 per cent and 50 per cent. Following the acquisition, CSC would hold four of the UK's top six out-of-town shopping centres.
The Trafford Centre, which opened in 1998, attracts 35 million visitors a year. It houses 230 shops, including Selfridges and Marks & Spencer, as well as 60 restaurants and bars. When the Trafford Centre finally opened after 27 months of construction, Mr Whittaker – who is worth $1.6bn, according to Forbes – abseiled into the building.
For Mr Whittaker – whose family hold 73 per cent of the Peel Group – the proposed deal with CSC is the latest in a meteoric career. The Peel Group's empire includes Peel Ports and Peel Airports, which holds stakes in three airports close to Liverpool, Durham and Sheffield.
Mr Whittaker made his mark in the 1970s when he started acquiring industrial firms on profitable land. Since he took Peel private in 2004, he has also invested in industries, including sustainable energy, hotels and utilities.