Simon walks away from Capital Shopping Centres

Simon Property Group has announced that it has no plans to make a firm offer for Capital Shopping Centres, leaving the FTSE 100-listed real estate group free to pursue its planned acquisition of the Trafford Centre near Manchester.

Obliged to make up its mind by a Takeover Panel-imposed deadline, Simon said it could not proceed with a bid unless Capital opened up its books. "Simon therefore has no alternative other than to announce that it does not intend to make an offer," the company said.

The group, which proposed an indicative offer of 425p per share last month, nonetheless renewed its calls for shareholders to vote against the Trafford deal, which will see the owner of the shopping centre, the Yorkshire-based billionaire John Whittaker's Peel Group, become the biggest shareholder in Capital.

Reiterating its view that the Trafford deal would destroy shareholder value, Simon, which owns 5.1 per cent of Capital, also questioned CSC's recent claim of a potential net asset value of up to 625p per share.

"If the CSC board really believes in this potential value, why is it proposing to issue 33 per cent of the company's existing shares to Peel at a price of 400p, thereby diluting existing shareholders?" Simon said.

Investors are due to vote on the Trafford deal at a specially convened meeting later this month.

Despite Simon's reservations, analysts expect a favourable outcome for Capital, as it has the backing of major shareholders, including the South African businessman Donald Gordon, who owns a 13.3 per cent stake. That, coupled with the CSC board's support for the deal, meant that there was little surprise at Simon's decision to walk away.

"Other than paying a ludicrous price for the asset, similar to the 625p value outlined by CSC in its defence document... Simon had no option but to walk," Olivetree Securities' analyst Mark Kelly said.

He added that, in keeping with a previous threat, Simon was likely to sell its stake as a result, "but we sense there is sufficient demand for this stock from South African institutional shareholders to ensure this doesn't act as too much of an overhang".

Following Simon's announcement, Capital, whose shares closed at 381.7p, down 10.8p, said it continued to recommend the Trafford deal.