£3bn bid fails to net retail centre giant

A POTENTIAL £3 billion bid for Capital Shopping Centres was flushed out yesterday at the company confirmed it wants to buy Manchester's giant Trafford Centre.

CSC yesterday revealed that it received a possible offer on Wednesday from US shareholder Simon Property which tried but failed to have the 1.6bn Trafford Centre acquisition postponed, promising "a potential cash offer for the company."

But CSC chief executive David Fischel said: "Their letter did not contain any offer or indicative offer, nor provide any certainty that an offer will be made."

Fischel said shareholders would be able to vote on the Trafford deal at a meeting on 20 December.

A pair of analysts yesterday said that CSC's plan to buy the Trafford Centre would value the company at about 425-450p a share, or 15.5-22.3 per cent more than its 368p net asset value at 30 June. Simon Property holds a 5.6 per cent stake in CSC.

Execution Noble analyst Michael Burt said a bid for CSC would have to exceed net asset value by more than 10 per cent to encourage key shareholders to sell, and also to reflect the quality of its 4.9bn shopping centre portfolio.

He said: "The Trafford deal will increase CSC's market capitalisation and hence increase the size of cheque Simon would have to write to acquire the business from 2.5bn to 3.1bn.

"An offer would need to start with a four to ensure shareholder support," Burt added, referring to a bid of more than 400p.

If the Trafford Centre deal goes ahead, seller Peel Group - controlled by billionaire John Whittaker - will become CSC's biggest shareholder with a 19.9 per cent stake.

CSC would own ten of the 25 biggest British shopping centres, cementing its status as a retail heavyweight.

Whittaker, chairman of Peel Group, would join the CSC board as a non-executive director and deputy chairman.

Earlier this year, Peel led a consortium that tried to buy Leith-based Forth Ports.

Nomura analyst Mike Prew said the planned Trafford Centre deal changed the complexion of the UK real estate investment trust (Reit) market.

He said: "Reits are finally working it out and doing what they were designed to do, which is use their corporate paper as currency for property transactions."

To acquire the 1.9 million-square-foot centre, Peel Group - via its unit Tokenhouse Holdings - will receive 747.6 million in shares and convertible bonds from CSC, while the latter will take on 854m of debt.

CSC yesterday completed a placement of 9.9 per cent or 62.3 million of its existing shares at 355p, in an accelerated book build with institutional and other investors that raised 221.2m.

CSC was formed out of the de-merger of Liberty International earlier this year.