US tycoon offers to fund Capital's Trafford deal

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The Independent Online

The US property tycoon stalking Capital Shopping Centres (CSC) yesterday offered to pay for the group's bitterly contested purchase of the Trafford Centre from rival mogul John Whittaker.

In a letter to Capital chairman Patrick Burgess, David Simon, chairman and chief executive of US Mall owner Simon Property, said his company was prepared to subscribe to a sale of up to 205.5 million of Capital Shopping shares priced at 400p each to fund the £1.6bn Trafford deal.

Currently Capital is proposing to pay for the acquisition by issuing 224 million new shares at 367p to Mr Whittaker's Peel Group. That will give him a 25 per cent stake in Capital. As a result he would have considerable say in the future direction of the company.

Mr Simon had earlier suggested that he could bid for Capital and asked for it to delay the Trafford deal as a result. After that proposal was refused, he indicated he could sell Simon's 5 per cent stake in Capital if the deal went through.

The latest intervention comes just a week before an EGM when Capital's shareholders will be asked to approve the Trafford deal. However, the deadline is tighter than it looks. Nearly half of Capital's shareholders are South African and a public holiday on Thursday, means that many will take an extended break and so make their decisions on the Capital deal earlier in the week.

In the letter Mr Simon said: "We recognise that Trafford Centre may be a strategically important asset, although we continue to have concerns regarding the agreed purchase price. To a greater extent we are concerned that the funding of the transaction in shares, on the agreed terms, results in CSC – and by extension its shareholders – overpaying for the Trafford Centre. We have been speaking to other shareholders in CSC, who have expressed similar concerns."

Mr Simon and his advisers, Citigroup and Lazard, spent a week sounding out CSC's other shareholders ahead of yesterday's move. Mr Simon said that he believed that the deal on the table would see Peel gaining "significant control" of Capital without paying a premium. He said the possibility of a bid from Simon also still remained on the table, although Simon wants access to CSC's books.

"Given that this new proposal solves a significant concern that has been expressed about the Trafford Centre acquisition in its current form, we firmly believe you should recommend it to your shareholders," he said.

"If CSC is to proceed with the Trafford Centre acquisition, financing that transaction on clearly better terms has to be in the company's and its shareholders' best interests. We would be more than happy to engage with you immediately on this."

Capital last night declined to comment on the letter. It is expected to respond formally through the stock exchange later today. However, it is thought likely that the group will reject the latest proposal despite Mr Simon's offer of talks.

But the offer of preferential funding for Capital could yet be enough to cause some shareholders to think twice ahead of Monday's vote.

The Simon Property Group has its headquarter in Indiana and it is listed on the New York Stock Exchange. It operates more than 390 shopping centres across the US and boasts a market capitalisation of $29bn (£18bn).