| Thu 25 Nov 2010, 9:03 | | CSO - Capital Shopping Centres Group Plc - Proposed acquisition of the Trafford |
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CSO
CSO
CSO - Capital Shopping Centres Group Plc - Proposed acquisition of the Trafford
Centre Group and placing of up to 62.3 million new ordinary shares
CAPITAL SHOPPING CENTRES GROUP PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code: CSO
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN
OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.
PROPOSED ACQUISITION OF THE TRAFFORD CENTRE GROUP AND PLACING OF UP
TO 62.3 MILLION NEW ORDINARY SHARES
Further to the announcement on 24 November 2010, Capital Shopping Centres Group
PLC (the "Company" or "CSC") today announces that it has reached an agreement
with Tokenhouse Holdings (IoM) Limited (the "Seller"), one of the holding
companies of the Peel Group, under which it will acquire The Trafford Centre
Group together with approximately GBP77 million* in cash from Peel (the
"Acquisition") in exchange for up to 167.3 million* new ordinary shares in CSC
(the "Consideration Shares") and an aggregate nominal amount of up to GBP209.0
million* 4.076 per cent. convertible bonds to be issued by CSC (the "Convertible
Bonds") to Peel.
CSC also announces that it is placing up to 62.3 million new ordinary shares
(the "Placing Shares"), representing up to 9.9 per cent. of the Company`s
Existing Shares immediately prior to the placing, with institutional and certain
other investors through an accelerated Bookbuild process to be carried out by
Merrill Lynch International and UBS Limited (the "Placing") at a price to be
determined at the close of the Bookbuild (the "Placing Price"). The book will
open with immediate effect.
Key transaction highlights:
- The Trafford Centre, located near Manchester, is one of the UK`s most
successful retail and leisure destinations attracting 35 million customer visits
annually, with 1.9 million sq. ft. of retail, catering and leisure
space, including approximately 0.2 million sq. ft. at Barton Square, a major
homeware and leisure extension.
- The Acquisition involves an equity purchase price of GBP747.6 million for The
Trafford Centre and a further amount of approximately GBP77 million* in respect
of a cash contribution by Peel, in return for the issue of Consideration Shares
and Convertible Bonds by CSC to Peel. On the basis of CSC`s 30 June 2010 Net
Asset Value per share of 368 pence, the Acquisition implies a price for The
Trafford Centre of approximately GBP1.60 billion, taking into account The
Trafford Centre Group`s net debt of GBP798 million, which mostly comprises
long-dated amortising CMBS notes, and other net liabilities of GBP54 million at
30 June 2010. This represents a 3 per cent. discount to the 1 November 2010
external valuation of GBP1.65 billion.
- Specifically, the Acquisition of 100 per cent. of The Trafford Centre will:
- strengthen CSC`s position as the leading operator of pre-eminent UK regional
shopping centres. Post the Acquisition, CSC will own fourteen UK shopping
centres, including ten of the top 25 and four of the top six out-of-town
shopping centres;
- significantly increase CSC`s presence in the key North West regional market,
alongside Manchester Arndale;
- strengthen retailer relationships, add The Trafford Centre`s successful
leisure and catering offerings and provide an opportunity to combine best
practices across CSC and The Trafford Centre;
- provide significant asset management opportunities to grow ERV at The Trafford
Centre; and
- further enhance the overall financial position of the Enlarged Group with the
addition of The Trafford Centre`s high-quality income stream and long-dated CMBS
debt.
- The Acquisition will result in Peel holding approximately 19.9 per cent.** of
CSC`s Enlarged Issued Share Capital (and approximately 24.9 per cent.** assuming
conversion of the Convertible Bonds); John Whittaker, Chairman of Peel and a
highly regarded real estate investor, will join the Board of CSC as a Non-
Executive Director and Deputy Chairman.
- The Placing strengthens the overall financial position of the Group, reducing
the loan to value ratio from 53 per cent. to approximately 47 per cent.*, and
increases the Group`s flexibility to invest further in its existing key assets.
Following the Acquisition and the Placing, after funding certain items arising
as a result of the Acquisition, the Enlarged Group is expected to have headroom
in terms of cash and committed facilities of approximately GBP360 million*.
CSC intends to publish a combined prospectus and circular containing further
details relating to the Acquisition as soon as practicable. The Acquisition is
subject to the approval of CSC`s Shareholders at an Extraordinary General
Meeting which is expected to be held on 20 December 2010.
Commenting on the transaction, Patrick Burgess MBE, Chairman of CSC, said:
"We are delighted to announce this significant transaction which represents an
outstanding opportunity for shareholders. We are looking forward to welcoming
Peel as a major shareholder and to benefiting from John Whittaker`s expertise on
the board of Capital Shopping Centres Group PLC. The Trafford Centre is an
exceptional asset which will be an important component of the Group`s long term
future prospects. In addition, the Placing will substantially strengthen the
Group`s financial position to the benefit of all shareholders."
Commenting on the transaction, David Fischel, Chief Executive of CSC, said:
"The transaction fits well with the strategy of establishing CSC as the leading
developer, owner and manager of pre-eminent UK regional shopping centre
destinations and the Placing improves the Group`s financial flexibility to
pursue the range of active management projects under consideration. We look
forward to working with John Whittaker and The Trafford Centre team and to
strongly driving forward the Group`s overall performance."
Commenting on the transaction, John Whittaker, Chairman of Peel, said:
"The prospect of blending The Trafford Centre with the Capital Shopping Centres
portfolio is very exciting. Capital Shopping Centres is widely regarded as the
leading owner and operator of pre-eminent UK regional shopping centres and
through Peel`s investment of equity, assets and expertise we hope to assist in
taking the Company forward to new heights. I am relishing the prospect of
joining CSC`s highly professional and experienced Board and working with the CSC
team to further the success of the Company."
Merrill Lynch International is acting as Sponsor in connection with the Placing.
Merrill Lynch International and UBS Limited are acting as Joint Bookrunners in
connection with the Placing. RBS Hoare Govett is acting as Lead
Manager in connection with the Placing.
Merrill Lynch International is acting as Sponsor and financial adviser to CSC in
connection with the Acquisition. UBS Limited is also providing financial advice
to the Company in connection with the Acquisition.
CONFERENCE CALL:
A conference call for analysts and investors will be held today at 08.00 GMT. To
access the conference call, please dial:
UK Standard International: +44 (0)1452 555 566
South Africa Free Call: 0800 980 759
Conference ID: 27441487
A replay facility will be available for 14 days to 8 December 2010. To access
the replay, please dial:
UK Free Call Dial In: 0800 953 1533
UK Local Dial In: 0845 245 5205
International Dial in: +44 (0) 1452 55 00 00
Access Number: 27441487#
A presentation relating to the Acquisition is available for download on the
Group`s website http://www.capital-shopping-centres.co.uk/news/press_releases.
A copy of this announcement is also available for download at www.capital-
shopping-centres.co.uk.
*Assumes a Placing Price of 368 pence per Ordinary Share (equivalent to 30 June
2010 CSC Net Asset Value per share) and the issue of 62.3 million Placing
Shares. The size of the cash component of the Acquisition (indicative figure of
approximately GBP77 million shown in this Announcement) is calculated by
reference to, and therefore will ultimately depend on, the actual Placing Price
and the actual number of Placing Shares issued (both of which are to be
determined in the Bookbuild). The number of Consideration Shares and the nominal
amount of Convertible Bonds to be issued to Peel are also calculated by
reference to, and therefore will ultimately depend on, the actual number of
Placing Shares to be issued (which is being determined in the Bookbuild).
**Following the Acquisition and Placing, Peel will hold 19.8 per cent. and 24.7
per cent. of CSC`s Enlarged Issued Share Capital which, excluding 6.1 million
Ordinary Shares held by the Company`s employee share plans which do not normally
vote, equates to 19.9 per cent. of the Ordinary Shares (post transaction) and
24.9 per cent. assuming conversion of the Convertible Bonds.
ENQUIRIES:
Capital Shopping Centres Group PLC: +44 (0)20 7887 4220
David Fischel Chief Executive
Matthew Roberts Finance Director
Kate Bowyer Investor Relations
BofA Merrill Lynch: +44 (0)20 7628 1000
Simon Mackenzie-Smith
Simon Fraser
George Close-Brooks
Rajan Somchand
UBS Investment Bank: +44 (0)20 7567 8000
Hew Glyn Davies
Jonathan Bewes
Fergus Horrobin
Chris Madderson
RBS Hoare Govett: +44 (0)20 7678 8000
Justin Jones
Sara Hale
Lee Morton
Hudson Sandler (CSC UK Public Relations) +44 (0)20 7796 4133
Michael Sandler
Wendy Baker
College Hill Associates (CSC SA Public Relations) +27 (0)11 447 3030
Nicholas Williams
Financial Dynamics (Peel Public Relations) +44 (0)20 7269 9343
Dominic Morgan
J.P. Morgan Cazenove (Peel financial adviser) +44 (0)20 7742 4000
Robert Fowlds
Edouard Asselin
1. Background to and reasons for the Acquisition
The Group is the leading specialist developer, owner and manager of pre-eminent
UK regional shopping centres. CSC owns thirteen regional shopping centres
amounting to 14.1 million sq. ft. of retail space which, in aggregate, are
externally valued at GBP5.0 billion as at 1 November 2010. The Trafford Centre,
located near Manchester in the United Kingdom, is one of the country`s most
successful retail and leisure destinations. The Trafford Centre was externally
valued at GBP1.65 billion as at 1 November 2010 and has over 230 units
(including over 50 catering and leisure units). The Trafford Centre has 1.9
million sq. ft. of retail, catering and leisure space, including approximately
0.2 million sq. ft. at Barton Square, a major homeware and leisure extension.
CSC aims to be the landlord of choice for retailers and to provide compelling
destinations for shoppers. The Trafford Centre is expected to fit well with this
strategy, enhancing the market- leading position of CSC as an operator of pre-
eminent UK regional shopping centres.
The Board believes that the Acquisition provides a rare opportunity to acquire
100 per cent. ownership of a pre-eminent UK out-of-town regional shopping
centre and conforms with CSC`s strategy of focusing on the UK`s largest and
most successful shopping centre destinations, reflecting the continuing trend
for trade to concentrate into fewer retail locations. The Acquisition is
consistent with the objective of the Demerger which was to create a pure, high
quality UK regional shopping centre REIT which is attractive to investors and
vendors of assets. It is expected that the Acquisition and the Placing will
have a neutral impact on earnings per share in the first full year and on Net
Asset Value per share*.
*This statement does not constitute and should not be construed as a profit
forecast.
The Board believes that the Acquisition will create a higher quality and
more robust business that is capable of generating improved total returns for
Shareholders by:
(a) strengthening the Company`s position as the leading operator of
pre-eminent UK regional shopping centres:
- CSC will own ten of the top 25 shopping centres and four of the top
six out-of- town shopping centres. The Acquisition will increase the number
of pre-eminent shopping centres owned by CSC from thirteen to fourteen of the
UK`s top 50 regional shopping centres, representing more than any other
operator; and
- the proportion of the Group`s property portfolio in pre-eminent out-of-town
shopping centres will increase from 52 per cent. to 64 per cent. as a result of
the Acquisition, and the Enlarged Group`s share of the prime regional shopping
centre sector will rise to 33 per cent.
(b) significantly increasing the Group`s presence in the key North West regional
retail market (alongside the Group`s investment in the Manchester Arndale
Centre) which is the UK`s largest regional retail market outside Greater London
and South East England:
- the Acquisition enables CSC to replicate the cluster strategy successfully
implemented in the North East region involving the Metrocentre, Gateshead and
Eldon Square, Newcastle.
(c) realising operating benefits at both The Trafford Centre and across the
Company`s existing portfolio:
- the Acquisition strengthens relationships with existing retailers, such as
John Lewis, Hollister and Superdry, and introduces certain key new names to CSC,
such as Selfridges, LEGO, DKNY and Skechers, increasing CSC`s ability to offer
flagship locations to leading retailers;
- The Trafford Centre`s successful leisure and catering operations add to the
Group`s overall expertise and involvement in this important category; and
- the Acquisition offers the opportunity to combine best practices across CSC
and The Trafford Centre Group, strengthening the media attractiveness of the
combined portfolio (in relation to advertising, for example) with over 300
million customer visits per annum, and through the ability to introduce CSC`s
group purchasing opportunities in service charge expenditure.
(d) providing significant asset management opportunities to grow ERV at The
Trafford Centre, in addition to CSC`s existing organic growth plans, especially
given that the original structure of The Trafford Centre was built to
accommodate additional floors, thereby enabling cost-effective expansion. Such
opportunities include:
- the introduction of additional Major Space User flagship stores, given that
there are only eight Major Space Users compared to fourteen at Lakeside,
Thurrock;
- the creation of additional retail space from the conversion of dormant space,
subject to planning permission;
- the creation of space to enable unit re-configurations; and
- the continued strengthening of the Barton Square offering, including the scope
for expansion as a tourist destination and broadening of the retail mix.
(e) through the Placing, strengthening the overall financial position of the
Group:
- the Placing will reduce the Group`s loan to value ratio to the Board`s stated
desired range of between 40 per cent. and 50 per cent.;
- the Placing increases the Group`s flexibility to invest further in its
existing key assets; and
- the proceeds of the Placing facilitate the repayment of the GBP81 million
facility secured upon Barton Square.
(f) through the Acquisition, enhancing the overall financial position of the
Enlarged Group through:
- the addition of The Trafford Centre Group`s high quality income stream; and
- the long-dated CMBS notes related to The Trafford Centre with final repayment
in 2035.
Following the Acquisition and the Placing, after funding certain items arising
as a result of the Acquisition, the Enlarged Group is expected to have headroom
in terms of cash and committed facilities of approximately GBP360 million*.
The Placing and the Group`s investment strategy are fully supported by Peel.
The Acquisition represents an exceptional opportunity for CSC, particularly in
an environment where the supply of new shopping centres has reduced following
the recent economic downturn.
The Gordon family, which holds 14.6 per cent. of CSC`s Existing Shares, is fully
supportive of the proposed transaction.
2. Recent developments
Simon Property Group, a 5.6 per cent. Shareholder in the Company, was contacted
on 23 November 2010 regarding the Acquisition and the Placing. Simon Property
Group requested in a letter to CSC received on 24 November 2010 that CSC not
proceed further with the Acquisition and the Placing until it had had the
opportunity to present CSC with a potential cash offer for the Company at an
unspecified premium to Net Asset Value. The letter did not contain any offer or
indicative offer nor provide any certainty that an offer would be made. The
Board of CSC has concluded that it is not in Shareholders` interests to delay
the Placing and has determined to proceed with the Acquisition and the Placing.
Shareholders in the Company will have an opportunity to vote on the Acquisition
at the Extraordinary General Meeting which is expected to be convened for 20
December 2010. This has been communicated to Simon Property Group.
Shareholders should be aware that there is no certainty that an offer will be
made nor as to the terms upon which any such offer may be made. This
announcement has been made without the consent of Simon Property Group.
3. Details of the Placing
CSC intends to place up to 62.3 million new ordinary shares, representing up to
9.9 per cent. of CSC`s Existing Shares immediately prior to the Placing, with
institutional and certain other investors.
The Placing is being conducted, subject to the satisfaction of certain
conditions, through an accelerated Bookbuild process to be carried out by
Merrill Lynch International and UBS Limited (the "Joint Bookrunners"). The book
will open with immediate effect. The Bookbuild is expected to close no later
than 4.30 p.m. (London time) today but may be closed earlier or later at the
discretion of the Joint Bookrunners. The Joint Bookrunners may, in agreement
with the Company, accept bids that are received after the Bookbuild has closed.
The Placing Price and the number of Placing Shares will be agreed between the
Joint Bookrunners and the Company following completion of the Bookbuild and will
then be announced on a Regulatory Information Service (the "Pricing
Announcement").
The proceeds of the Placing will strengthen the overall financial position of
the Group and will be used to:
(a) reduce the Group`s loan to value ratio to the Board`s stated desired range
of between 40 per cent. and 50 per cent.;
(b) increase the Group`s financial flexibility, thus permitting additional
investment in, and so enhancing returns from, its pre-eminent UK regional
shopping centres, including the asset acquired pursuant to the Acquisition; and
(c) repay the bank loan of The Trafford Centre Group of GBP81 million which is
secured upon Barton Square and to reprofile certain derivative financial
instruments with an estimated cost of approximately GBP33 million.
If the Acquisition does not proceed, the proceeds of the Placing will be used
for capital investment in the Group`s existing UK regional shopping centres.
The Placing Shares will be issued credited as fully paid and will rank pari
passu with the Company`s Existing Shares, including the right to receive all
dividends and other distributions declared, made or paid, in respect of such
shares after the date of issue of the Placing Shares.
The Placing is conditional, inter alia, upon Placing Admission becoming
effective and the Placing and Sponsor`s Agreement not being terminated. It is
anticipated that the settlement date will be 30 November 2010.
The Company will apply for admission of the Placing Shares to the Official List
of the Financial Services Authority and to listing on the London Stock
Exchange`s main market for listed securities. It is expected that UK Admission
in respect of the Placing Shares will take place and that trading will commence
on 30 November 2010. Subject to all conditions being fulfilled, the Company will
also apply to the Johannesburg Stock Exchange for the listing of the Placing
Shares on the Main Board of the Johannesburg Stock Exchange. It is expected that
the listing of the Placing Shares on the Johannesburg Stock Exchange will take
place on 30 November 2010.
As part of the Placing, the Company has agreed that, save in connection with the
Acquisition, it will not issue or sell any Ordinary Shares for a period of 90
days after Placing Admission, without the prior consent of the Joint
Bookrunners. This agreement does not, however, prevent the Company from granting
or satisfying exercises of options granted pursuant to existing employee share
schemes of the Company as disclosed in publicly available information.
Merrill Lynch International is acting as Sponsor in connection with the Placing.
Merrill Lynch International and UBS Limited are acting as Joint Bookrunners in
connection with the Placing.
RBS Hoare Govett is acting as Lead Manager in connection with the Placing. The
Banks have entered into the Placing and Sponsor`s Agreement with the Company
under which, subject to the conditions set out in that agreement, Merrill Lynch
International and UBS Limited have agreed to use reasonable endeavours to
procure Subscribers and, to the extent that any such Subscribers default, the
Banks have agreed to subscribe themselves for such Placing Shares.
Further details of the terms and conditions of the Placing and the Placing and
Sponsor`s Agreement are summarised in Appendices 2 and 4 to this Announcement.
4. The terms of the Acquisition
Pursuant to the Acquisition, CSC will acquire The Trafford Centre Group and
receive approximately GBP77 million* in cash in exchange for up to 167.3
million* Consideration Shares of 50 pence each and an aggregate nominal amount
of up to GBP209.0 million* Convertible Bonds. The number of Ordinary Shares and
the aggregate nominal amount of Convertible Bonds to be issued will be
determined such that in effect:
- 155.0 million Consideration Shares are being issued at a price per share of
368 pence and GBP177.2 million Convertible Bonds are being issued at par in
respect of the acquisition of The Trafford Centre itself, implying an equity
purchase price of GBP747.6 million; and
- Up to 12.3 million* Consideration Shares are being issued at the Placing Price
and up to GBP31.8 million* Convertible Bonds are being issued at a premium or
discount to their par value (depending on the premium or discount of the Placing
Price to 368 pence) for approximately GBP77 million* in cash.
The price per share of 368 pence, in respect of the acquisition of The Trafford
Centre itself, is equivalent to CSC`s diluted, adjusted, Net Asset Value per
share at 30 June 2010 and implies a valuation for The Trafford Centre of GBP1.60
billion (including Barton Square at GBP85 million), taking into account The
Trafford Centre Group`s net debt of GBP798 million and other net liabilities of
GBP54 million at 30 June 2010. This represents a 3 per cent. discount to the 1
November 2010 valuation. As a result, the transaction, after payment of the REIT
entry charge and transaction costs, has no material impact on the Group`s Net
Asset Value per share.
Between 30 June 2010 and 1 November 2010, CSC`s property valuations have
increased by 1.2 per cent., equivalent to an increase in Net Asset Value of 9
pence per share.
The Acquisition will result in Peel holding up to 169.7 million* Ordinary Shares
(including Ordinary Shares owned prior to the Acquisition) and up to GBP209.0
million* in aggregate nominal amount of Convertible Bonds, representing 19.8 per
cent. of the Enlarged Issued Share Capital of CSC, and 24.7 per cent. assuming
conversion of the Convertible Bonds. The Consideration Shares will be issued as
fully paid and will rank pari passu in all respects with the Existing Shares,
including the right to receive in full all dividends and other distributions (if
any) declared, made or paid after the closing date of the Acquisition.
The Convertible Bonds will be perpetual subordinated bonds, convertible into
Ordinary Shares of the Company at the option of the bondholder any time after 2
years from the date of issue, or earlier in certain limited circumstances
(including on the making of a takeover offer for the Company). The initial
conversion price will be 368 pence per Ordinary Share. The initial conversion
price may be adjusted downwards from time to time in accordance with the terms
and conditions of the Convertible Bonds, including in circumstances where the
Company pays a dividend in respect of its Ordinary Shares in excess of 15 pence
in respect of any fiscal year. The Convertible Bonds will bear interest at a
rate of 4.076 per cent. per annum payable semi-annually in arrear.
The Company intends to make an application for the admission to listing of the
Convertible Bonds on the official list of the FSA and to trading on the
Professional Securities Market of the London Stock Exchange.
The cash component of the Acquisition will principally be used to fund:
- the REIT entry charges payable as a result of the Acquisition, estimated to be
approximately GBP33 million; and
- active management initiatives at The Trafford Centre.
Upon acquisition of The Trafford Centre Group, The Trafford Centre will
automatically become part of the CSC Group REIT tax-exempt group and this will
require the Enlarged Group to pay a REIT entry charge of approximately GBP33
million described above.
In connection with the Acquisition, the Company and the Seller have entered into
the Acquisition Agreement. A summary of the principal terms of the Acquisition
Agreement is set out in Appendix 4 to this Announcement.
The Acquisition constitutes a Class 1 transaction for the purposes of the
Listing Rules and therefore requires the approval of Shareholders. A combined
prospectus and circular containing further details of the Acquisition, and
including the notice to convene the Extraordinary General Meeting, will be
posted to Shareholders as soon as practicable. The Extraordinary General Meeting
is currently expected to be held on 20 December 2010.
The Acquisition is also conditional upon, inter alia, completion of the Placing,
and the admission of the Consideration Shares to trading on the London Stock
Exchange and to listing on the Official List. The long stop date for the
satisfaction or waiver of each condition to the Acquisition Agreement is 31
January 2011. Completion of the Acquisition is currently expected to take place
on 22 December 2010.
5. Information relating to the Trafford Centre Group
The principal activity of The Trafford Centre Group is the ownership and
operation of The Trafford Centre, one of the pre-eminent retail and leisure
destinations in the North West of England. Since its opening in September 1998,
visitor numbers have grown year on year and The Trafford Centre is one of the
most successful retail and leisure destinations in the United Kingdom. The
Trafford Centre is located approximately six miles to the west of the city
centre of Manchester and The Trafford Centre covers 142 acres and has over 230
units (including over 50 catering and leisure units). The Trafford Centre has
1.9 million sq. ft. of retail, catering and leisure space, including
approximately 0.2 million sq. ft. at Barton Square, a major homeware and leisure
extension. Anchor tenants include Selfridges, Debenhams, John Lewis and Marks &
Spencer.
The Trafford Centre Group`s property assets were externally valued on 1 November
2010 at GBP1.65 billion, representing (excluding Barton Square) a net initial
yield of 5.01 per cent. and a nominal equivalent yield of 5.58 per
cent. Day 1 income including Barton Square was GBP88 million as at 1 November
2010 and ERV was GBP105 million.
As at 31 March 2010, The Trafford Centre Group had investment properties of
GBP1,678.4 million; net debt was GBP803.3 million representing a debt to assets
ratio of 47.9 per cent. which compares to CSC`s loan to value ratio of 53.3
per cent. at 30 June 2010.
In the year ended 31 March 2010, The Trafford Centre Group had revenue of
GBP98.7 million and made a consolidated profit for the year of GBP170.6 million.
The Trafford Centre`s retailer mix is diverse. The top 20 tenants account for
37.7 per cent. of the Trafford Centre`s rent roll. National or international
multiple retailers represent over 95 per cent. of the rent roll.
As at 30 September 2010, The Trafford Centre`s occupancy level was 98 per cent.
by rent and there were five void units. Since 31 March 2010, there have been ten
new lettings where solicitors have been instructed and/or terms have been issued
and five administrations exchanged.
Rent review settlements have been agreed in line with The Trafford Centre
Group`s expectations and the successful conclusion of the 2008 rent review
programme resulted in a healthy rent roll which, coupled with the success in
letting the significant majority of void units, has put The Trafford Centre in a
very strong position. As at 30 September 2010, there were five and eleven rent
reviews under negotiation in relation to 2009 and 2010 respectively.
As at 31 March 2010, the value of the gross assets which are the subject of the
Acquisition amounted to GBP1.7 billion.
6. The Relationship Agreement and the Proposed Director
The Peel Group, of which The Trafford Centre Group forms part, is a leading
infrastructure, transport and real estate enterprise in the UK with assets owned
and under management in excess of GBP6 billion. Founded by John Whittaker in
1971, the Peel Group has grown through a philosophy of recycling capital and
long term investment, predominantly in the North West of England. The Peel Group
holds significant investments in a number of growing businesses, including
ports, media, energy, land, developments, investment property, environmental
assets, airports, hotels, utilities and advertising, as well as a portfolio of
investments in quoted companies.
The Trafford Centre Group is being disposed of by the Seller, itself one of the
holding companies of the Peel Group. The Peel Group is controlled by the Billown
Trust. The Billown Trust (of which John Whittaker is a discretionary
beneficiary) is based in the Isle of Man and owns 73.2 per cent. of the Peel
Group. The remainder of the Peel Group is owned by the Olayan Group which is a
private multinational enterprise comprising 50 companies and affiliated
businesses engaged in distribution, manufacturing, services and investment in
Saudi Arabia. It operates or actively participates in more than 40 companies,
often in partnership with leading multinationals. Internationally it is a global
investor, with emphasis on both public and private equities and on fixed income
securities.
On the completion of the Acquisition, Peel will have a shareholding representing
19.8 per cent. of the Enlarged Issued Share Capital of the Company and will be a
related party for the purposes of the Listing Rules. The Company and the Seller
will enter into a Relationship Agreement to govern the relationship between the
Group and the Wider Peel Group.
The Wider Peel Group will be restricted under the Relationship Agreement from
holding more than 24.9 per cent. of the Ordinary Shares of the Company for the
first year after completion of the Acquisition, and from holding more than 29.9
per cent. for the following two years (assuming in each case that the
Convertible Bonds are converted in full). It also cannot announce or make a
takeover offer during such period without the consent of the Board. These
restrictions will not apply in certain circumstances, including if a third party
announces a firm intention to make a takeover offer for the Company.
The Wider Peel Group may not dispose of any Ordinary Shares in the first year
after completion of the Acquisition. Thereafter, the Wider Peel Group may
dispose of Ordinary Shares save that, in the second year, it may not dispose of
more than 4.9 per cent. to a single Shareholder, and, in the third year, no more
than 9.9 per cent. In the fourth and fifth years, it may not dispose of any
Ordinary Shares to a single Shareholder such that that Shareholder owns more
than 14.9 per cent. of the Company unless that Shareholder makes a takeover
offer for the Company. It may also not sell the Convertible Bonds during such
three year period. These restrictions will not apply in certain circumstances,
including if a third party makes a takeover offer for the Company. Peel is also
entitled to pledge the Consideration Shares and Convertible Bonds for the
purposes of providing security for borrowings and Peel intends to exercise this
right.
As part of the Relationship Agreement, the Company has agreed not to dispose of
its interest in The Trafford Centre during the 36 month period following
completion of the Acquisition. It has further agreed, subject to certain
exceptions, not to materially change the management and operational structure or
to reduce the workforce at The Trafford Centre for one year after completion of
the Acquisition.
Following completion of the Acquisition, Peel will have the right to appoint one
Non-Executive Director subject to it maintaining a shareholding in the Company
of at least ten per cent. Initially Peel will appoint John Whittaker, Chairman
of Peel and a highly regarded real estate investor, to the Board of CSC who will
also be the Deputy Chairman of the Group. Under the provisions of the UK
Corporate Governance Code, at least half the Board, excluding the Chairman,
should comprise independent non-executive directors. John Whittaker will not be
considered independent upon his appointment and the Company`s Nomination and
Review Committee will consider the need for the appointment of an additional
independent non-executive director after the Acquisition. Under his proposed
letter of appointment, Mr. Whittaker`s first election by shareholders will be at
the 2011 Annual General Meeting of the Company, for an initial term of three
years expiring at the 2014 Annual General Meeting. Mr Whittaker will not receive
any fee for his role as a Non-Executive Director. Mr. Whittaker will be entitled
to be reimbursed reasonable and proper travelling expenses for attendance at
board meetings and other meetings at which the Company requires his attendance.
Further details of the principal terms of the Relationship Agreement are set out
in Appendix 4 to this Announcement.
7. Financial position and current trading and prospects
CSC
CSC`s interim management statement for the period from 1 July 2010 to 3 November
2010 was published on 3 November 2010 and can be downloaded from CSC`s website
at www.capital-shopping-centres.co.uk.
The Trafford Centre
For the six month period to 30 September 2010, the unaudited management accounts
showed net rental income of GBP41.5 million. Deducting administration costs of
GBP3.1 million and net finance costs (excluding the impact of fair value
movements on derivatives) of GBP26.1 million, gives a profit before tax and
revaluation movements of GBP12.3 million. The charge for the fair value of
movements in derivatives in the six month period was GBP22.0 million.
Occupancy levels have remained high, increasing to 98 per cent. at 30 September
2010. Since 31 March 2010, only one new tenant has entered administration and
letting activity in the period showed ten new lettings achieved. In addition, a
number of further units have opened in the period or are due to open by the end
of the year. Footfall for the period 1 January 2010 to 30 September 2010 was
approximately ten per cent. higher than for the equivalent period in 2009.
8. Dividend policy
The Board reviewed and revised its dividend policy at the time of the Demerger.
There will be no change in the Company`s dividend policy as a result of the
Acquisition.
The Company intends to pay a total dividend of not less than 15 pence per
Ordinary Share with respect to the year ending 31 December 2010 with a 10 pence
final dividend for 2010 expected to be paid in the second quarter of 2011.
*Assumes a Placing Price of 368 pence per Ordinary Share (equivalent to 30 June
2010 CSC Net Asset Value per share) and the issue of 62.3 million Placing
Shares. The size of the cash component of the Acquisition (indicative figure of
approximately GBP77 million shown in this Announcement) is calculated by
reference to, and therefore will ultimately depend on, the actual Placing Price
and the actual number of Placing Shares issued (both of which are to be
determined in the Bookbuild). The number of Consideration Shares and the nominal
amount of Convertible Bonds to be issued to Peel are also calculated by
reference to, and therefore will ultimately depend on, the actual number of
Placing Shares to be issued (which is being determined in the Bookbuild).
IMPORTANT NOTICE
This Announcement is an advertisement and not a prospectus and investors should
not subscribe for or purchase any shares referred to in this document except on
the basis of information in this Announcement and the combined circular and
prospectus (the "Prospectus") which is expected to be published in connection
with the Acquisition and the admission of the shares being issued by the Company
in connection with the Placing and Acquisition. The Prospectus, if and when
published, will be available from the registered office of the Company at 40
Broadway, London SWlH 0BT and on the Company`s website at www.capital-shopping-
centres.co.uk. The Prospectus (if published) will also be available for
inspection during normal business hours on any weekday (Saturdays, Sundays and
public holidays excepted) at the offices of Linklaters LLP, One Silk Street,
London EC2Y 8HQ and at the offices of Merrill Lynch South Africa (Pty) Ltd, 138
West Street, Sandown, Sandton 2196, South Africa, up to and including the date
of Admission of the Consideration Shares.
Neither the content of the Company`s website nor any website accessible by
hyperlinks to the Company`s website is incorporated in, or forms part of, this
Announcement. The distribution of this Announcement, the Prospectus and any
other documentation associated with the Acquisition and Placing and/or the
transfer of the Consideration Shares and Placing Shares into jurisdictions other
than the United Kingdom may be restricted by law. Persons into whose possession
these documents come should inform themselves about and observe any such
restrictions. Any failure to comply with these restrictions may constitute a
violation of the securities laws of any such jurisdiction. In particular, such
documents should not be distributed, forwarded to or transmitted, directly or
indirectly, in whole or in part, in or into Australia or Canada or Japan or the
United States. These materials do not constitute or form a part of any offer or
solicitation to purchase or subscribe for securities in the United States or in
any other jurisdiction in which such offer or solicitation is unlawful. No
action has been taken by the Company that would permit an offer of the
Consideration Shares and Placing Shares or possession or distribution of this
Announcement, the Prospectus or any other offering or publicity material in any
jurisdiction where action for that purpose is required, other than in the United
Kingdom.
The securities mentioned herein have not been and will not be registered under
the US Securities Act or under any securities laws of any State or other
jurisdiction of the United States and may not be offered, sold, resold,
transferred or delivered, directly or indirectly, within the United States
except pursuant to an applicable exemption from the registration requirements of
the US Securities Act and in compliance with the securities laws of any State or
other jurisdiction of the United States. There will be no public offer of the
securities mentioned herein in the United States. This Announcement may not be
released, published or distributed, directly or indirectly, in whole or in part,
in or into the United States.
No statement in this Announcement is intended to be a profit forecast and no
statement in this Announcement should be interpreted to mean that earnings per
share of the Company for the current or future financial years would necessarily
match or exceed the historical published earnings per share of the Company.
Merrill Lynch International, which is authorised and regulated in the United
Kingdom by the FSA, and Merrill Lynch South Africa, which is a registered
sponsor and member of the JSE, are acting exclusively for CSC and no one else in
connection with the Placing and Admission and will not regard any other person
(whether or not a recipient of this document) as a client in relation to the
Placing and Admission and will not be responsible to anyone other than CSC for
providing the protections afforded to its clients or for providing advice in
relation to the Placing and Admission or any transaction, arrangement or other
matter referred to in this document.
UBS Limited is acting exclusively for CSC and no one else in connection with the
Placing and Admission and will not regard any other person (whether or not a
recipient of this document) as a client in relation to the Placing and Admission
and will not be responsible to anyone other than CSC for providing the
protections afforded to its clients or for providing advice in relation to the
Placing and Admission or any transaction, arrangement or other matter referred
to in this document.
RBS Hoare Govett Limited is acting exclusively for CSC and no one else in
connection with the Placing and Admission and will not regard any other person
(whether or not a recipient of this document) as a client in relation to the
Placing and Admission and will not be responsible to anyone other than CSC for
providing the protections afforded to its clients or for providing advice in
relation to the Placing and Admission or any transaction, arrangement or other
matter referred to in this document.
This document contains or incorporates by reference "forward-looking
statements", within the meaning of Section 27A of the US Securities Act and
Section 21E of the US Exchange Act, regarding the belief or current expectations
of the Group, its Directors and other members of its Senior Management about the
Group`s businesses and the transactions described in this document, including
statements relating to possible future write-downs and its capital planning
projections. Generally, words such as "may", "could", "will", "expect",
"intend", "estimate", "anticipate", "believe", "plan", "seek", "continue" or
similar expressions identify forward-looking statements.
These forward-looking statements are not guarantees of future performance.
Rather, they are based on current views and assumptions and involve known and
unknown risks, uncertainties and other factors, many of which are outside the
control of the Group and are difficult to predict, that may cause actual results
to differ materially from any future results or developments expressed or
implied from the forward-looking statements.
These statements are further qualified by the risk factors disclosed in or
incorporated by reference in this document that could cause actual results to
differ materially from those in the forward-looking statements. See Appendix 3
entitled Risk Factors.
These forward-looking statements speak only as at the date of this document.
Except as required by the FSA, the London Stock Exchange, the Johannesburg Stock
Exchange, the Part VI Rules or applicable law, CSC does not have any obligation
to update or revise publicly any forward-looking statement, whether as a result
of new information, further events or otherwise. Except as required by the FSA,
the London Stock Exchange, the Johannesburg Stock Exchange, the Part VI Rules or
applicable law, CSC expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statement contained
herein to reflect any change in CSC`s expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
The contents of this Announcement are not to be construed as legal, financial,
business or tax advice. Each prospective investor should consult its own legal
adviser, financial adviser or tax adviser for legal, financial or tax advice.
Disclosure requirements of the Takeover Code (the "Code")
Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or
more of any class of relevant securities of the Company or of any paper offeror
(being any offeror other than an offeror in respect of which it has been
announced that its offer is, or is likely to be, solely in cash) must make an
Opening Position Disclosure following the commencement of the offer period and,
if later, following the announcement in which any paper offeror is first
identified. An Opening Position Disclosure must contain details of the person`s
interests and short positions in, and rights to subscribe for, any relevant
securities of each of (i) the Company and (ii) any paper offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no
later than 3.30 p.m. (London time) on the tenth business day following the
commencement of the offer period and, if appropriate, by no later than 3.30 p.m.
(London time) on the tenth business day following the announcement in which any
paper offeror is first identified. Relevant persons who deal in the relevant
securities of the Company or of a paper offeror prior to the deadline for making
an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1
per cent. or more of any class of relevant securities of the Company or of any
paper offeror must make a Dealing Disclosure if the person deals in any relevant
securities of the Company or of any paper offeror. A Dealing Disclosure must
contain details of the dealing concerned and of the person`s interests and short
positions in, and rights to subscribe for, any relevant securities of each of
(i) the Company and (ii) any paper offeror, save to the extent that these
details have previously been disclosed under Rule 8. A Dealing Disclosure by a
person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m.
(London time) on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of the Company or a paper offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the Company and by any offeror
and Dealing Disclosures must also be made by the Company, by any offeror and by
any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).
Details of the Company and any offeror in respect of whose relevant securities
Opening Position Disclosures and Dealing Disclosures must be made can be found
in the Disclosure Table on the Takeover Panel`s website at
www.thetakeoverpanel.org.uk, including details of the number of relevant
securities in issue, when the offer period commenced and when any offeror was
first identified. If you are in any doubt as to whether you are required to make
an Opening Position Disclosure or a Dealing Disclosure, you should contact the
Panel`s Market Surveillance Unit on +44 (0)20 7638 0129.
APPENDIX 1
INDICATIVE TIMETABLE
Each of the times and dates in the table below is indicative only and may be
subject to change.
2010
Announcement of Placing and Acquisition ..............7.00 a.m. on 25 November
Announcement of results of Placing ............................... 25 November
Publication of combined circular and prospectus .................. 26 November
Admission of Placing Shares on the London Stock Exchange
and the Johannesburg Stock Exchange ...............................30 November
Record Date for voting at the Extraordinary General Meeting 18 December
Latest time and date for receipt of Forms of Proxy 12 noon on 18 December
Extraordinary General Meeting ......................... 12 noon on 20 December
Completion of Acquisition ........................................ 22 December
Admission of Consideration Shares on the London Stock Exchange and the
Johannesburg Stock Exchange ...................................... 22 December
Notes:
(a) The times and dates set out in the expected timetable of principal events
above and mentioned throughout this document may be adjusted by CSC, in which
event details of the new times and dates will be notified to the UK Listing
Authority, and an announcement will be made on a Regulatory Information Service
and on SENS and, if appropriate, will be notified to Shareholders.
Notwithstanding the foregoing, Shareholders may not receive any further written
communication.
(b) References to times in this document are to London times unless otherwise
stated.
(c) Transfers of Ordinary Shares between the principal CSC UK Register and the
CSC SA Register will be prohibited and the registration of CSC Ordinary Shares
on the SA Register will be suspended from the close of business on 9 December
2010 until the Record Date for voting at Extraordinary General Meeting.
APPENDIX 2
TERMS AND CONDITIONS OF THE PLACING
IMPORTANT INFORMATION ON THE PLACING FOR INVITED SUBSCRIBERS ONLY MEMBERS OF THE
PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT, THIS
APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN ARE FOR INFORMATION
PURPOSES ONLY AND ARE DIRECTED ONLY AT (A) PERSONS WHO HAVE PROFESSIONAL
EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) OF
THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005
(THE "ORDER"), AS AMENDED; (B) MEMBERS OR CREDITORS OF A CORPORATE BODY WITHIN
THE MEANING OF ARTICLE 43 OF THE ORDER, (C) THOSE PERSONS FALLING WITHIN ARTICLE
49(2)(A) TO (D) OF THE ORDER; OR (D) THOSE PERSONS TO WHOM IT CAN OTHERWISE
LAWFULLY BE DISTRIBUTED (EACH A "RELEVANT PERSON").
THIS ANNOUNCEMENT AND THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN
MUST NOT BE ACTED OR RELIED UPON BY PERSONS OTHER THAN RELEVANT PERSONS. ANY
INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS COMMUNICATION RELATES IS
AVAILABLE ONLY TO (A) IN THE UNITED KINGDOM, RELEVANT PERSONS AND, (B) IN ANY
MEMBER STATE OF THE EUROPEAN ECONOMIC AREA OTHER THAN THE UNITED KINGDOM,
"QUALIFIED INVESTORS" WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS
DIRECTIVE (DIRECTIVE 2003/71/EC), AND WILL BE ENGAGED IN ONLY WITH SUCH PERSONS.
PERSONS DISTRIBUTING THIS ANNOUNCEMENT AND THIS APPENDIX MUST SATISFY THEMSELVES
THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS
APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATES IS AVAILABLE ONLY
TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS
ANNOUNCEMENT AND THIS APPENDIX DO NOT THEMSELVES CONSTITUTE OR FORM PART OF AN
OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY.
THE SECURITIES MENTIONED HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE US SECURITIES ACT OR UNDER ANY SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, RESOLD,
TRANSFERRED OR DELIVERED, DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES
EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE US SECURITIES ACT AND IN COMPLIANCE WITH THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION OF THE UNITED STATES. THERE WILL BE NO PUBLIC OFFER OF THE
SECURITIES MENTIONED HEREIN IN THE UNITED STATES.
THE SECURITIES MENTIONED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE US
SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), ANY STATE SECURITIES COMMISSION
OR ANY OTHER REGULATORY AUTHORITY IN THE UNITED STATES, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE PLACING OR THE
ACCURACY OR ADEQUACY OF THIS ANNOUNCEMENT OR THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES. PERSONS (INCLUDING
WITHOUT LIMITATION, NOMINEES AND TRUSTEES) WHO HAVE A CONTRACTUAL OR OTHER LEGAL
OBLIGATION TO FORWARD A COPY OF THIS ANNOUNCEMENT OR THE PROSPECTUS SHOULD SEEK
APPROPRIATE ADVICE BEFORE TAKING ANY ACTION.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE A DISCLOSURE DOCUMENT OR PRODUCT
DISCLOSURE STATEMENT FOR THE PURPOSES OF THE AUSTRALIAN CORPORATIONS ACT 2001
AND WILL NOT BE LODGED WITH THE AUSTRALIAN SECURITIES AND INVESTMENTS
COMMISSION. THE PLACING IS VOID AND INCAPABLE OF ACCEPTANCE IN AUSTRALIA BY ANY
PERSON WHO IS NOT A SOPHISTICATED INVESTOR, PROFESSIONAL INVESTOR OR WHOLESALE
CLIENT FOR THE PURPOSES OF THE CORPORATIONS ACT 2001.
lf a Subscriber indicates to Merrill Lynch International and/or UBS Limited (the
"Joint Bookrunners") that it wishes to participate in the Placing by making an
oral offer to acquire Placing Shares, it will be deemed to have read and
understood this Appendix 2 and the announcement of which it forms part in their
entirety (together with the Appendix, hereinafter, this "Announcement") and the
Pricing Announcement and to be making such offer on the terms and conditions,
and to be providing the representations, warranties, indemnities, agreements and
acknowledgements, contained in this Announcement. In particular each such
Subscriber represents, warrants and acknowledges that it is a Relevant Person
and undertakes that it will acquire, hold, manage and dispose of any of the
Placing Shares that are allocated to it for the purposes of its business only.
Further, each such Subscriber represents, warrants and agrees that (a) if it is
a financial intermediary, as that term is used in Article 3(2) of the Prospectus
Directive, that the Placing Shares subscribed for and/or purchased by it in the
Placing will not be acquired on a non-discretionary basis on behalf of, nor will
they be acquired with a view to their offer or resale to, persons in
circumstances which may give rise to an offer of securities to the public other
than an offer or resale in a member state of the EEA which has implemented the
Prospectus Directive to Qualified Investors, or in circumstances in which the
prior consent of the Joint Bookrunners has been given to each such proposed
offer or resale; and (b) it is either (i) outside the United States and is
subscribing for Placing Shares for its own account or is purchasing the Placing
Shares for an account with respect to which it exercises sole investment
discretion and that it (and any such account) is outside the United States; or
(ii) a qualified institutional buyer" ("QlB") (as defined in Rule 144A under the
US Securities Act) or purchasing Placing Shares on behalf of a QlB, and who will
sign the US Investor Letter.
The distribution of this Announcement and the offer and/or placing of Placing
Shares in certain other jurisdictions may be restricted by law. No action has
been taken by the Joint Bookrunners and RBS Hoare Govett Limited (the "Banks")
or the Company that would permit an offer of the Placing Shares or possession or
distribution of this Announcement or any other offering or publicity material
relating to the Placing Shares in any jurisdiction where action for that purpose
is required. Persons into whose possession this Announcement comes are required
by the Banks and the Company to inform themselves about and to observe any such
restrictions.
Each Subscriber`s commitments will be made solely on the basis of the
information set out in this Announcement, the Pricing Announcement and the
Prospectus. Each Subscriber, by participating in the Placing, agrees that it has
neither received nor relied on any other information, representation, warranty
or statement made by or on behalf of any of the Banks or the Company and none of
the Banks, the Company or any person acting on such person`s behalf nor any of
their Affiliates has or shall have liability for any Subscriber`s decision to
accept this invitation to participate in the Placing based on any other
information, representation, warranty or statement. Each Subscriber acknowledges
and agrees that it has relied on its own investigation on the business,
financial or other position of the Company in accepting a participation in the
Placing. Nothing in this paragraph shall exclude the liability of any person for
fraudulent misrepresentation.
No representation or warranty, express or implied, is or will be made as to, or
in relation to, and no responsibility or liability will be accepted by any of
the Banks or any of their respective employees, Affiliates, advisers or agents
or any other person as to or in relation to, the accuracy or completeness of any
of the Prospectus or this Announcement or any other written or oral information
made available to or publicly available to any Subscriber, any person acting on
such Subscriber`s behalf or any of their respective advisers, and any liability
therefore is expressly disclaimed.
Subscribers are referred to this Announcement, the Pricing Announcement and the
Prospectus, which the Company intends to publish once finalised, containing
details of, inter alia, the Placing. This Announcement and the Prospectus have
been prepared and issued, or will be issued, by the Company, and each of these
documents is and will be the sole responsibility of the Company.
Principal terms of the Placing
The principal terms upon which the Placing will be conducted are set out below:
(a) Merrill Lynch International and UBS Limited are acting as joint bookrunners
and as agents of the Company and RBS Hoare Govett is acting as lead manager.
(b) Participation in the Placing will only be available to persons who may
lawfully be, and are, invited to participate by the Joint Bookrunners. Merrill
Lynch International, UBS Limited, RBS Hoare Govett and their respective
Affiliates are each entitled to enter bids in the Bookbuild as principal.
(c) The Bookbuild will establish a single price payable to the Joint Bookrunners
by all Subscribers whose bids are successful (the "Placing Price"). The Placing
Price will be agreed between the Joint Bookrunners and the Company following
completion of the Bookbuild. Any discount to the market price of the ordinary
shares of the Company will be determined in accordance with the UKLA Listing
Rules and, to the extent applicable, the listing requirements of the JSE. The
Placing Price and the number of Placing Shares will be announced on a Regulatory
Information Service following the completion of the Bookbuild (the "Pricing
Announcement").
(d) To bid in the Bookbuild, Subscribers should communicate their bid by
telephone to their usual sales or equity capital markets contact at Merrill
Lynch International or UBS Limited. Each bid should state the number of Placing
Shares which the prospective Subscriber wishes to subscribe for at either the
Placing Price, which is ultimately established by the Company and the Joint
Bookrunners, or at prices up to a price limit specified in its bid. A bid in the
Bookbuild will be legally binding on the Subscriber by which, or on behalf of
which, it is made and will not be capable of variation or revocation by such
person after the close of the Bookbuild. Bids may be scaled down by the Joint
Bookrunners on the basis referred to in paragraph (i) below.
(e) The Bookbuild is expected to close no later than 4.30 p.m. (London time) on
25 November 2010 but may be closed earlier or later at the discretion of the
Joint Bookrunners. The Joint Bookrunners may, in agreement with the Company,
accept bids that are received after the Bookbuild has closed. The Company
reserves the right (upon the agreement of the Joint Bookrunners) to reduce or
seek to increase the amount to be raised pursuant to the Placing, in its
absolute discretion.
(f) Each prospective Subscriber`s allocation will be agreed between the Joint
Bookrunners and the Company and will be confirmed orally by the Joint
Bookrunners as agent of the Company following the close of the Bookbuild. That
oral confirmation will constitute an irrevocable legally binding commitment upon
that person (who will at that point become a Subscriber) in favour of the
Company and the Joint Bookrunners to subscribe for the number of Placing Shares
allocated to it at the Placing Price on the terms and conditions set out in this
Appendix and in accordance with the Company`s articles of association.
(g) Each prospective Subscriber `s allocation and commitment will be evidenced
by a contract note issued to such Subscriber by the Joint Bookrunners. The terms
of these paragraphs (a) to (o) will be deemed incorporated in that contract
note.
(h) Each Subscriber will also have an immediate, separate, irrevocable and
binding obligation, owed to the Joint Bookrunners (as agents of the Company), to
pay to the Joint Bookrunners (or as they may direct) in cleared funds, an amount
equal to the product of the Placing Price and the number of Placing Shares such
Subscriber has agreed to subscribe for and the Company has agreed to allot and
issue to that Subscriber. Each Subscriber`s obligation will be owed to the
Company and to the Joint Bookrunners.
(i) The Joint Bookrunners may choose to accept bids, either in whole or in part,
on the basis of allocations determined in agreement with the Company and may
scale down any bids for this purpose on such basis as they may determine. The
Joint Bookrunners may also, notwithstanding paragraphs (d) and (e) above above,
subject to the prior consent of the Company (i) allocate Placing Shares after
the time of any initial allocation to any person submitting a bid after that
time and (ii) allocate Placing Shares after the Bookbuild has closed to any
person submitting a bid after that time.
(j) A bid in the Bookbuild will be made on the terms and subject to the
conditions in this Announcement and will be legally binding on the Subscriber on
behalf of which it is made and, except with the consent of the Joint
Bookrunners, will not be capable of variation or revocation after the time at
which it is submitted.
(k) Except as required by law or regulation, no press release or other
announcement will be made by the Joint Bookrunners or the Company using the name
of any Subscriber (or its agent), in its capacity as Subscriber (or agent),
other than with such Subscriber`s prior written consent.
(l) Irrespective of the time at which a Subscriber`s allocation pursuant to the
Placing is confirmed, settlement for all Placing Shares to be subscribed for
pursuant to the Placing will be required to be made at the same time, on the
basis explained below under `Registration and Settlement`.
(m) All obligations under the Bookbuild and Placing will be subject to
fulfilment of the conditions referred to below under `Conditions of the Placing`
below and to the Placing not being terminated on the basis referred to below
under `Termination of the Placing and Sponsor`s Agreement`.
(n) By participating in the Bookbuild, each Subscriber will agree that its
rights and obligations in respect of the Placing will terminate only in the
circumstances described below and will not be capable of rescission or
termination by the Subscriber.
(o) To the fullest extent permissible by law, none of Merrill Lynch
International, UBS Limited, RBS Hoare Govett nor any of their respective
Affiliates shall have any liability to Subscribers (or to any other person
whether acting on behalf of a Subscriber or otherwise). In particular, none of
Merrill Lynch International, UBS Limited, RBS Hoare Govett nor any of their
respective Affiliates shall have any liability (including to the fullest extent
permissible by law, any fiduciary duties) in respect of the Joint Bookrunners`
conduct of the Bookbuild or of such alternative method of effecting the Placing
as the Joint Bookrunners and the Company may agree.
Conditions of the Placing
The principal conditions to the Placing are set out below:
The Placing is conditional upon the Placing and Sponsor `s Agreement becoming
unconditional and not having been terminated in accordance with its terms in
respect of the Placing.
The obligations of the Joint Bookrunners under the Placing and Sponsor `s
Agreement are, and the Placing is, conditional on, inter alia:
(a) Admission occurring by not later than 8.00 a.m. (London time) on 30 November
2010 (or such later time and/or date as the Company with the Joint Bookrunners
may agree);
(b) the warranties, representations and undertakings given by the Company in the
Placing and Sponsor`s Agreement being true and accurate and not misleading in
any respect on and as of the date of the Placing and Sponsor`s Agreement and at
any time prior to Placing Admission; and
(c) the fulfilment by the Company of its obligations under the Placing and
Sponsor `s Agreement which are required to be performed or satisfied on or
prior to Placing Admission, save to the extent that any non-compliance is not
material in the context of the Placing,
(all such conditions included in the Placing and Sponsor `s Agreement being each
a "condition" and together the "conditions").
If any condition in the Placing and Sponsor`s Agreement is not satisfied or
waived in accordance with the Placing and Sponsor`s Agreement within the stated
time periods (or such later time and/or date as the Company and the Joint
Bookrunners may agree), or has become incapable of being satisfied or the
Placing and Sponsor `s Agreement is terminated in accordance with its terms, the
Placing will lapse and the Subscriber `s rights and obligations under these
terms and conditions shall cease and terminate at such time and each Subscriber
agrees that no claim can be made by or on behalf of the Subscriber (or any
person on whose behalf the Subscriber is acting) in respect thereof.
The Joint Bookrunners may at their sole discretion and upon such terms as they
think fit, waive compliance by the Company with, or extend the time and/or date
for fulfilment by the Company of the whole or any part of any of the Company`s
obligations in relation to the conditions in the Placing and Sponsor `s
Agreement, save that certain conditions, including the condition relating to
Placing Admission referred to in paragraph (a) above may not be waived. Any such
extension or waiver will not affect Subscribers` commitments as set out in this
Announcement.
None of Merrill Lynch International, UBS Limited, RBS Hoare Govett nor any of
their respective Affiliates nor the Company shall have any liability to any
Subscriber (or to any other person whether acting on behalf of a Subscriber or
otherwise) in respect of any decision any of them may make as to whether or not
to waive or to extend the time and/or date for the satisfaction of any condition
to the Placing nor for any decision any of them may make as to the satisfaction
of any condition or in respect of the Placing generally.
Termination of the Placing and Sponsor `s Agreement
The rights of the Joint Bookrunners to terminate the Placing are set out below:
The Joint Bookrunners may, at their absolute discretion, by notice in writing to
the Company, terminate the Placing and Sponsor `s Agreement at any time prior to
Placing Admission if, inter alia:
(a) there has been a breach by the Company of any of its obligations under the
Placing and Sponsor`s Agreement; or
(b) any of the warranties, undertakings or covenants given by the Company in the
Placing and Sponsor `s Agreement is, or if repeated at any time up to and
including Placing Admission (by reference to the facts and circumstances then
existing) would be, untrue, inaccurate or misleading; or
(c) the Joint Bookrunners become aware that any statement in this Announcement
or the Prospectus is or becomes untrue, inaccurate or misleading in any respect
or any matter has arisen, which would, if the Placing were made at that time,
constitute an omission from this Announcement or the Prospectus (or any
amendment or supplement), and which the Joint Bookrunners in their absolute
discretion acting in good faith consider to be material in the context of the
Placing or Placing Admission; or
(d) in the opinion of the Joint Bookrunners, there has been a material adverse
change, or any development reasonably expected to amount to a material adverse
change, in the condition (financial, operational, legal or otherwise) or in the
earnings management, business affairs, business prospects or financial prospects
of the Group, whether or not arising in the ordinary course of business since
the date of the Placing and Sponsor`s Agreement; or
(e) there has occurred any material adverse change in national or international
financial, political or economic conditions or currency exchange rates or
exchange controls that has, in the opinion of the Joint Bookrunners, acting in
good faith, resulted in the marketing of the Placing Shares or the enforcement
of contracts for the subscription or sale of the Placing Shares becoming
impracticable or inadvisable; or
(f) the application for Placing Admission is withdrawn or refused by the FSA
and/or the London Stock Exchange.
If the Placing and Sponsor `s Agreement is terminated in accordance with its
terms, the rights and obligations of each Subscriber in respect of the Placing
as described in this Announcement and the Prospectus shall cease and terminate
at such time and no claim can be made by any Subscriber in respect thereof.
By participating in the Placing, each Subscriber agrees with the Company and the
Joint Bookrunners that the exercise by the Company or the Joint Bookrunners of
any right of termination or any other right or other discretion under the
Placing and Sponsor `s Agreement shall be within the absolute discretion of the
Company or the Joint Bookrunners (as the case may be) and that neither the
Company nor the Joint Bookrunners need make any reference to such Subscriber and
that neither the Company, Merrill Lynch International, UBS Limited, RBS Hoare
Govett nor any of their respective Affiliates shall have any liability to such
Subscriber (or to any other person whether acting on behalf of a Subscriber or
otherwise) whatsoever in connection with any such exercise.
By participating in the Placing, each Subscriber agrees that its rights and
obligations terminate only in the circumstances described above and will not be
capable of rescission or termination by it after oral confirmation by the Joint
Bookrunners following the close of the Bookbuild.
Registration and settlement
The basis of registration and settlement in connection with the Placing are set
out below.
If Subscribers are allocated any Placing Shares in the Placing they will be sent
a contract note or electronic confirmation which will confirm the number of
Placing Shares allocated to them, the Placing Price and the aggregate amount
owed by them to the Joint Bookrunners.
Each Subscriber will be deemed to agree that it will do all things necessary to
ensure that delivery and payment is completed in accordance with either the
standing CREST or certificated settlement instructions which they have in place
with the Joint Bookrunners.
Payment in full for any Placing Shares so allocated at the Placing Price must be
made by no later than midday (or such other time as shall be notified to each
Subscriber by the Joint Bookrunners on 26 November 2010 (or such other time
and/or date as the Company and the Joint Bookrunners may agree)).
Settlement of transactions in the Placing Shares following Placing Admission
will take place within the CREST system. Settlement through CREST will be on a T
+ 3 basis (according to business days in the UK) unless otherwise notified by
the Joint Bookrunners and is expected to occur on 30 November 2010. Settlement
will be on a delivery versus payment basis.
However, in the event of any difficulties or delays in the admission of the
Placing Shares to CREST or the use of CREST in relation to the Placing, the
Company and the Joint Bookrunners may agree that the Placing Shares should be
issued in certificated form. The Joint Bookrunners reserves the right to require
settlement for the Placing Shares, and to deliver the Placing Shares to
Subscribers, by such other means as they deem necessary if delivery or
settlement to Subscribers is not practicable within the CREST system or would
not be consistent with regulatory requirements in a Subscriber`s jurisdiction.
Interest is chargeable daily on payments not received on the due date in
accordance with the arrangements set out above, in respect of either CREST or
certificated deliveries, at the rate of two percentage points above prevailing
LIBOR.
If Subscribers do not comply with their obligations, the Joint Bookrunners may
sell their Placing Shares on their behalf and retain from the proceeds, for
their own account and benefit, an amount equal to the Placing Price of each
share sold plus any interest due.
Subscribers will, however, remain liable for any shortfall below the Placing
Price and for any stamp duty or stamp duty reserve tax (together with any
interest or penalties) which may arise upon the sale of their Placing Shares on
their behalf.
If Placing Shares are to be delivered to a custodian or settlement agent,
Subscribers must ensure that, upon receipt, the conditional contract note is
copied and delivered immediately to the relevant person within that
organisation.
Representations and warranties
The representations and warranties to be given by each of the Subscribers in the
Placing are set out below:
By participating in the Placing each Subscriber (and any person acting on such
Subscriber `s behalf) will be deemed to have acknowledged, undertaken,
represented, warranted and agreed (as the case may be) as follows:
(a) (i) it has read this Announcement and the Prospectus (including the
information incorporated by reference therein) in its entirety and that its
subscription for the Placing Shares is subject to and based upon all the terms,
conditions, warranties, acknowledgements, agreements and undertakings and other
information contained therein and herein; and (ii) it has received all
information that it believes is necessary or appropriate in order to make an
investment decision in respect of the Company and the Placing Shares;
(b) in making any decision to purchase the Placing Shares, it confirms that (i)
it has knowledge and experience in financial, business and international
investment matters as is required to evaluate the merits and risks of purchasing
the Placing Shares, (ii) it is experienced in investing in securities of this
nature in the Company`s sector and is aware that it may be required to bear, and
is able to bear, the economic risk of, and is able to sustain a complete loss in
connection with the Placing and (iii) it has relied on its own examination and
due diligence of the Company, and the terms of the Placing, including the merits
and risks involved;
(c) it has: (i) made its own assessment and satisfied itself concerning legal,
regulatory, tax, business and financial considerations in connection herewith to
the extent it deems necessary; (ii) received and read this Announcement and the
Prospectus (including the information incorporated by reference therein); (iii)
had access to review publicly available information concerning the Company that
it considers necessary or appropriate and sufficient in making an investment
decision; (iv) reviewed such information as it believes is necessary or
appropriate in connection with its subscription or purchase of the Placing
Shares; and (v) has made its investment decision based solely upon its own
judgement, due diligence and analysis and not upon any view expressed or
information provided by or on behalf of Merrill Lynch International, UBS Limited
and RBS Hoare Govett;
(d) (i) it understands and agrees that it may not rely on any investigation that
Merrill Lynch International, UBS Limited, RBS Hoare Govett or any person acting
on their behalf may or may not have conducted with respect to the Company or the
Placing and Merrill Lynch International, UBS Limited and RBS Hoare Govett have
not made any representation to it, express or implied, with respect to the
accuracy or adequacy of publicly available information concerning the Company,
the merits of the Placing, the subscription or purchase of the Placing Shares,
or as to the condition, financial or otherwise, of the Company or as to any
other matter relating thereto, and nothing herein shall be construed as a
recommendation to it to purchase the Placing Shares, and (ii) it acknowledges
and understands that the content of this Announcement and the Prospectus and any
other announcement or presentation relating to the Placing have been prepared by
and are exclusively the responsibility of the Company and no such announcement
or presentation nor any other information has been prepared by Merrill Lynch
International, UBS Limited or RBS Hoare Govett for the purposes of the Placing
or is in any way the responsibility of Merrill Lynch International, UBS Limited
or RBS Hoare Govett;
(e) with respect to any Placing Shares offered to or purchased by it in the
United States or for and on behalf of persons in the United States, it
understands and agrees: (i) that it is a QIB; (ii) that the Placing Shares are
being offered and sold to it in accordance with the exemption from registration
under the US Securities Act for transactions by an issuer not involving a public
offering of securities in the United States and that the Placing Shares have not
been, and will not be, registered under the US Securities Act or with any State
or other jurisdiction of the United States; (iii) that the Placing Shares may
not be reoffered, resold, pledged or otherwise transferred by it except (a)
outside the United States in an offshore transaction pursuant to Rule 903 or
Rule 904 of Regulation S (and, if in a privately negotiated transaction, to a
person that is not an ERISA Entity, as defined below), (b) in the United States
to a person whom the seller reasonably believes is a QIB (that is not an ERISA
Entity) to whom notice is given that the offer, sale or transfer is being made
in reliance on Rule 144A, pursuant to Rule 144A under the US Securities Act, (c)
pursuant to Rule 144 under the US Securities Act (if available), (d) to the
Company, (e) pursuant to an effective registration statement under the US
Securities Act, or (f) pursuant to another available exemption, if any, from
registration under the US Securities Act, in each case in compliance with all
applicable laws; (iv) that the Placing Shares are "restricted securities" as
defined in Rule 144(a)(3) under the US Securities Act; (v) to notify any
transferee to whom it subsequently reoffers, resells, pledges or otherwise
transfers the Placing Shares of the foregoing restrictions on transfer; (vi) for
so long as the Placing Shares are "restricted securities" (within the meaning of
Rule 144(a)(3) under the US Securities Act), it will segregate such Placing
Shares from any other shares that it holds that are not restricted securities,
shall not deposit such shares in any depositary facility established or
maintained by a depositary bank and will only transfer such Placing Shares in
accordance with this paragraph; (vii) if it is acquiring the Placing Shares as a
fiduciary or agent for one or more investor accounts, each such account is a
QIB, it has sole investment discretion with respect to each such account and it
has full power and authority to make the acknowledgements, representations,
warranties and agreements herein on behalf of each such account; (viii) it is
acquiring such Placing Shares for its own account (or the account of a QIB as to
which it has sole investment discretion) for investment purposes and (subject to
the disposition of its property being at all times within its control) not with
a view to any distribution of the Placing Shares; (ix) whether or not it
currently holds the Company`s American Depositary Receipts ("ADRs"), it will
receive the Placing Shares in the form of ordinary shares and not in the form of
ADRs; and (x) that no representation has been made as to the availability of the
exemption provided by Rule 144 or any other exemption under the US Securities
Act for the reoffer, resale, pledge or transfer of the Placing Shares;
(f) a purchase of Placing Shares by an employee benefit plan subject to the US
Employee Retirement Income Security Act of 1974 ("ERISA") or a plan subject to
Section 4975 of the US Internal Revenue Code of 1986, as amended (the "Code"),
or by any entity whose assets are treated as assets of any such plan, could
result in severe penalties or other liabilities for the Company; and it
represents, warrants and agrees that it is not (a) (i) an "employee benefit
plan" as described in Section 3(3) of ERISA and subject to ERISA, (ii) a "plan"
subject to Section 4975 of the Code, (iii) any entity whose assets are treated
as assets of any such plan by reason of such employee benefit plan`s or plan`s
investment in the entity, or (iv) a "benefit plan investor" as such term is
otherwise defined in the regulations promulgated by the US Department of Labor,
and (b) if it is a governmental, church, non-US or other plan which is subject
to any federal, state, local or non-US law that is substantially similar to the
provisions of Title I of ERISA or Section 4975 of the Code, its purchase,
holding or disposition of Placing Shares will not constitute or result in a non-
exempt violation under any such substantially similar law (the entities referred
to in (a)-(b) of this paragraph, being referred to as "ERISA Entities");
(g) it is not acquiring any of the Placing Shares as a result of any form of
general solicitation or general advertising (within the meaning of Rule 502(c)
of Regulation D under the US Securities Act), or it is located outside the
United States and it is not acquiring any of the Placing Shares as a result of
any form of directed selling efforts (as defined in Regulation S);
(h) if it will be a "US Holder" as defined in the Prospectus under "Part XII--
Taxation--(C) United States Taxation--Passive Foreign Investment Company
Considerations" in the Prospectus, it acknowledges that there is a significant
risk that the Company is treated as a passive foreign investment company for US
federal income tax purposes, which status will subject US holders to adverse US
federal income tax consequences, and it has read and understood the disclosure
thereunder; (i) it understands that no action has been or will be taken by any
of the Company, Merrill Lynch International, UBS Limited, RBS Hoare Govett or
any person acting on behalf of any of the Company, Merrill Lynch International,
UBS Limited or RBS Hoare Govett that would, or is intended to, permit a public
offer of the Placing Shares in any country or jurisdiction where any such action
for that purpose is required;
(j) it is entitled to purchase the Placing Shares under the laws of all relevant
jurisdictions which apply to it, and its purchase of the Placing Shares will be
in compliance with applicable laws and regulations in the jurisdiction of its
residence, the residence of the Company, or otherwise;
(k) it will acquire any Placing Shares purchased by it for its account or for
one or more accounts as to each of which it exercises sole investment discretion
and it has full power to make the foregoing acknowledgements, representations
and agreements on behalf of each such account;
(l) it understands and acknowledges that Merrill Lynch International, UBS
Limited and RBS Hoare Govett will rely upon the truth and accuracy of the
representations, warranties and acknowledgements set forth herein;
(m) participation in the Placing is on the basis that it is not and will not be
a client of Merrill Lynch International, UBS Limited or RBS Hoare Govett and
Merrill Lynch International, UBS Limited and RBS Hoare Govett will have no
duties or responsibilities to a Subscriber for providing protections afforded to
its clients under the rules of the FSA or for providing advice in relation to
the Placing nor in respect of any representations, warranties, undertakings or
indemnities contained in the Placing and Sponsor`s Agreement;
(n) it will make payment to the Joint Bookrunners in accordance with the terms
and conditions of this Announcement on the due times and dates set out in this
Announcement, failing which the relevant Placing Shares may be placed with
others on such terms as the Joint Bookrunners determine;
(o) the person who it specifies for registration as holder of the Placing Shares
will be (i) the Subscriber or (ii) a nominee of the Subscriber, as the case may
be. Merrill Lynch International, UBS Limited and RBS Hoare Govett and the
Company will not be responsible for any liability to stamp duty or stamp duty
reserve tax resulting from a failure to observe this requirement. It agrees to
acquire Placing Shares pursuant to the Placing on the basis that the Placing
Shares will be allotted to a CREST stock account of Merrill Lynch International
who will hold them as nominee on behalf of the Subscriber until settlement in
accordance with its standing settlement instructions with it;
(p) the allocation, allotment, issue and delivery to it, or the person specified
by it for registration as holder, of Placing Shares will not give rise to a
stamp duty or stamp duty reserve tax liability under (or at a rate determined
under) any of sections 67, 70, 93 and 96 of the Finance Act 1986 (depository
receipts and clearance services) and that it is not participating in the Placing
as nominee or agent for any person or persons to whom the allocation, allotment,
issue or delivery of Placing Shares would give rise to such a liability;
(q) it and any person acting on its behalf falls within Article 19(5) and/or
49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order
2005, as amended, and undertakes that it will acquire, hold, manage and (if
applicable) dispose of any Placing Shares that are allocated to it for the
purposes of its business only and represents and warrants that it is entitled to
subscribe for Placing Shares comprised in its allocation under the laws of all
relevant jurisdictions which apply to it and that it has fully observed such
laws and obtained all governmental and other consents which may be required
thereunder and complied with all necessary formalities;
(r) it has not offered or sold and will not offer or sell any Placing Shares to
persons in the United Kingdom prior to Placing Admission except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or
otherwise in circumstances which have not resulted and which will not result in
an offer to the public in the United Kingdom within the meaning of section 85(1)
of the Financial Services and Markets Act 2000 (the "FSMA");
(s) if it is within the EEA, it is a qualified investor as defined in section
86(7) of FSMA, being a person falling within Article 2.1(e)(i), (ii) or (iii) of
the Prospectus Directive;
(t) it has only communicated or caused to be communicated and it will only
communicate or cause to be communicated any invitation or inducement to engage
in investment activity (within the meaning of section 21 of the FSMA) relating
to Placing Shares in circumstances in which section 21(1) of the FSMA does not
require approval of the communication by an authorised person;
(u) it has complied and it will comply with all applicable provisions of the
FSMA with respect to anything done by it or on its behalf in relation to the
Placing Shares in, from or otherwise involving the United Kingdom;
(v) if it has received any confidential price sensitive information about the
Company in advance of the Placing, it has not (i) dealt in the securities of the
Company; (ii) encouraged or required another person to deal in the securities of
the Company; or (iii) disclosed such information to any person, prior to the
information being made generally available; (w) it has not offered or sold and
will not offer or sell any Placing Shares to persons in the European Economic
Area prior to Placing Admission except to persons whose ordinary activities
involve them acquiring, holding, managing or disposing of investments (as
principal or agent) for the purpose of their business or otherwise in
circumstances which have not resulted and which will not result in an offer to
the public in any member state of the European Economic Area within the meaning
of the Prospectus Directive (which means Directive 2003/71/EC and includes any
relevant implementing measure in any member state);
(x) it has complied with its obligations in connection with money laundering and
terrorist financing under the Proceeds of Crime Act 2002, the Terrorism Act
2000, and the Money Laundering Regulations (2003) (the "Regulations") and, if
making payment on behalf of a third party, that satisfactory evidence has been
obtained and recorded by it to verify the identity of the third party as
required by the Regulations;
(y) if it is resident in South Africa, it is acting as a principal in respect of
the Placing for an aggregate subscription price of more than Rand 100,000;
(z) if it is resident in South Africa, it has obtained the necessary approvals
from the South African Reserve Bank in order to participate in the Placing or is
entitled to make use of an exemption to the South African Exchange Control
Regulations and accordingly is permitted to participate in the Placing;
(aa) the Company, Merrill Lynch International, UBS Limited, RBS Hoare Govett and
others will rely upon the truth and accuracy of the foregoing representations,
warranties, acknowledgements and agreements;
(bb) their acceptance of any of the Placing Shares is not by way of acceptance
of a public offer to be made in the Prospectus but is by way of a collateral
contract and as such section 87Q of the FSMA does not entitle Subscribers to
withdraw in the event that the Company publishes a supplementary prospectus in
connection with the Placing and Admission;
(cc) the Placing Shares will be issued subject to the terms and conditions of
this Appendix 2;
(dd) this Appendix 2 will be governed by and construed in accordance with
English law. All agreements to acquire shares pursuant to the Bookbuild and/or
the Placing will be governed by English law and the English courts shall have
exclusive jurisdiction in relation thereto except that proceedings may be taken
by the Company, Merrill Lynch International or UBS Limited in any jurisdiction
in which the relevant Subscriber is incorporated or in which any of its
securities have a quotation on a recognised stock exchange; and
(ee) it (and any person acting on its behalf) agrees to indemnify and hold the
Company, Merrill Lynch International, UBS Limited, RBS Hoare Govett and their
respective Affiliates, directors, officers and employees harmless from any and
all costs, claims, liabilities and expenses (including legal fees and expenses)
(i) arising out of or in connection with any breach of the representations,
warranties, acknowledgements, agreements and undertakings in this Appendix 2; or
(ii) incurred by Merrill Lynch International, UBS Limited, RBS Hoare Govett the
Company and/or any of their respective Affiliates, directors, officers and
employees arising from the performance of the Subscriber `s obligations or any
breach of the representations, warranties, acknowledgements, agreements and
undertakings, in each case as set out in this Announcement, and further agrees
that the provisions of this Appendix 2 shall survive after completion of the
Placing.
In addition, Subscribers should note that they will be liable for any capital
duty, stamp duty and all other stamp, issue, securities, transfer, registration,
documentary or other duties or taxes (including any interest, fines or penalties
relating thereto) payable outside the United Kingdom by them or any other person
on the acquisition by them of any Placing Shares or the agreement by them to
subscribe for any Placing Shares.
The representations, warranties, acknowledgements and undertakings contained in
this Appendix 2 are given to Merrill Lynch International, UBS Limited and RBS
Hoare Govett for themselves and on behalf of the Company and are irrevocable.
Merrill Lynch International, UBS Limited and RBS Hoare Govett are acting
exclusively for the Company and no one else in connection with the Bookbuild and
the Placing and Merrill Lynch International, UBS Limited and RBS Hoare Govett
will not be responsible to anyone (including Subscribers) other than the Company
for providing the protections afforded to their respective clients or for
providing advice in relation to the Bookbuild or the Placing or any other
matters referred to in this Appendix 2.
Each Subscriber and any person acting on behalf of the Subscriber acknowledges
that Merrill Lynch International, UBS Limited and RBS Hoare Govett do not owe
any fiduciary or other duties to any Subscriber in respect of any
representations, warranties, undertakings or indemnities in the Placing and
Sponsor`s Agreement or otherwise.
Each Subscriber and any person acting on behalf of each Subscriber acknowledges
and agrees that Merrill Lynch International, UBS Limited, RBS Hoare Govett or
any of their respective Affiliates may, at their absolute discretion, agree to
become a Subscriber in respect of some or all of the Placing Shares.
When a Subscriber or person acting on behalf of the Subscriber is dealing with
Merrill Lynch International or UBS Limited, any money held in an account with
any of Merrill Lynch International or UBS Limited (as the case may be) on behalf
of the Subscriber and/or any person acting on behalf of the Subscriber will not
be treated as client money within the meaning of the rules and regulations of
the FSA made under FSMA. The Subscriber acknowledges that the money will not be
subject to the protections conferred by the client money rules; as a
consequence, this money will not be segregated from Merrill Lynch
International`s or UBS Limited`s (as the case may be) money in accordance with
the client money rules and will be used by Merrill Lynch International or UBS
Limited (as the case may be) in the course of its own business; and the
Subscriber will rank only as a general creditor of Merrill Lynch International
or UBS Limited (as the case may be).
All times and dates in this Announcement may be subject to amendment. Merrill
Lynch International and UBS Limited shall notify the Subscribers and any person
acting on behalf of the Subscribers of any changes.
Past performance is no guide to future performance and persons needing advice
should consult an independent financial adviser.
Selling Restrictions
By participating in the Bookbuild and the Placing, Subscribers will be deemed to
have read and understood this Appendix 2 and the remainder of this Announcement
in its entirety, and to be participating, making an offer and acquiring Placing
Shares on the terms and conditions contained herein and to be providing the
representations, warranties, indemnities, acknowledgements and undertakings
contained herein.
In particular each such Subscriber represents, warrants and acknowledges that
it:
1. is a Relevant Person and undertakes that it will acquire, hold, manage or
dispose of any Placing Shares that are allocated to it for the purposes of its
business;
2. in the case of a Relevant Person in a member state of the EEA which has
implemented the Prospectus Directive (each a "Relevant Member State") who
acquires any Placing Shares pursuant to the Placing:
(i) it is a Qualified Investor; and
(ii) in the case of any Placing Shares acquired by it as a financial
intermediary, as that term is used in Article 3(2) of the Prospectus Directive,
that (a) the Placing Shares subscribed for and/or acquired by it in the Placing
have not been subscribed for and/or acquired on behalf of, nor have they been or
will be acquired with a view to their offer or resale to, persons in any
Relevant Member State other than Qualified Investors or in circumstances in
which the prior consent of the Joint Bookrunners has been given to the offer or
resale; or (b) where Placing Shares have been acquired by it on behalf of
persons in any member state of the EEA other than Qualified Investors, the
offer of those Placing Shares to it is not treated under the Prospectus
Directive as having been made to such persons; and
3. is acquiring the Placing Shares for its own account or is acquiring the
Placing Shares for an account with respect to which it exercises sole investment
discretion and has the authority to make, and does make, the acknowledgements,
representations and agreements contain in this Announcement and that it (and any
such account) is outside the United States or it is a dealer or other
professional fiduciary in the United States acting on a discretionary basis for
non-US beneficial owners (other than an estate or trust), and is acquiring the
Placing Shares in an offshore transaction in reliance upon Regulation S and it
is not purchasing the Placing Shares for the account of another person who is
resident or located in the United States unless (a) the instruction to purchase
was received from a person outside the United States and (b) the person giving
such instruction has confirmed that it (i) has the authority to give such
instruction and (ii) either (x) has investment discretion over such account or
(y) is an investment manager or investment company and that, in the case of each
of (x) and (y), is purchasing the Placing Shares in an "offshore transaction"
within the meaning of Regulation S; or if it is not outside the United States,
it is a QIB, or purchasing Placing Shares on behalf of a QIB, who will sign a
letter in the form agreed between the Company and the Joint Bookrunners ("US
Investor Letter") and understands (or, if it is acting for the account of
another person, such person has confirmed that such person understands) the
resale and transfer restrictions set out in "Representations and further terms"
contained herein.
4. If you are located in Australia, you acknowledge that this Announcement and
the Prospectus have not been lodged with the Australian Securities & Investments
Commission and are only directed to certain categories of exempt persons in
Australia and that:
(i) you are a person who is:
(a) a sophisticated investor for the purposes of section 708(8) of the
Australian Corporations Act 2001 (Cth) ("Corporations Act") and, if you are
relying on section 708(8)(c) of the Corporations Act, you attach a certificate
from a qualified accountant referred to in that section; or
(b) a professional investor for the purposes of section 708(11) of the
Corporations Act; and
(ii) if you acquire any Placing Shares, you further warrant and undertake that
you will not offer any Placing Shares for resale in Australia within 12 months
of any such Placing Shares being issued unless the resale offer is exempt from
the requirement to issue a disclosure document under the Corporations Act.
South African residents should be aware that South African Exchange Control
Regulations apply or may apply to a participation in the Placing. Accordingly,
they should obtain through an authorised dealer any necessary approval or
establish that an existing exchange control approval or exemption applies to
such investment. Within South Africa subscriptions can only be made for a
minimum subscription amount of Rand 100,000 per single addressee acting as
principal.
The distribution of this Announcement and the Placing and/or issue of the
Placing Shares in certain jurisdictions may be restricted by law. No action has
been taken by the Company, Merrill Lynch International, UBS Limited, RBS Hoare
Govett or any of their respective Affiliates, that would permit an offer of the
Placing Shares or possession or distribution of this Announcement or any other
offering or publicity material relating to such Placing Shares in any
jurisdiction where action for that purpose is required. Persons into whose
possession this Announcement comes are required by the Company and Merrill Lynch
International, UBS Limited and RBS Hoare Govett to inform themselves about and
to observe any such restrictions.
Each Subscriber agrees to provide the Joint Bookrunners with such relevant
documents as they may reasonably request to comply with requests or requirements
from the Joint Bookrunners resulting from requests that the Company may receive
from relevant regulators in relation to the Placing, subject to its legal,
regulatory and compliance requirements and restrictions.
Unless the context otherwise requires, all references to time are to London
time. All times and dates in this Announcement may be subject to amendment. The
Joint Bookrunners will notify Subscribers and any persons acting on behalf of
the Subscribers of any changes.
APPENDIX 3
SUMMARY OF RISK FACTORS
Shareholders and prospective investors should carefully consider the following
key risks.
Risks related to the Group and the Enlarged Group:
- declines in the UK retail real estate market and economic conditions could
have an adverse impact on the Group`s business, financial condition and results
of operations;
- deterioration in the real estate market and general economic conditions could
have an impact on the Group`s revenue;
- the Group may fail to integrate successfully the acquisition of The Trafford
Centre Group and other future acquisitions, and may incur additional liabilities
as part of such acquisitions;
- retail tenants (including anchor or multiple tenants), who provide a
significant portion of the Group`s rental income, are exposed to deteriorating
consumer spending in periods of economic uncertainty;
- the Group faces inherent risks relating to property investment and development
activities;
- the valuation of the Group`s property is inherently subjective and uncertain
and is based on assumptions which may prove to be inaccurate;
- the Group`s credit facilities contain various covenants which, if not complied
with, could require accelerated repayment, thereby materially adversely
affecting the Group`s business, financial condition and results of operations;
- borrowings by Group subsidiaries are secured on Group assets and any failure
to meet the requirements of the debts incurred may have an adverse effect on the
Group`s business, financial condition and results of operations;
- the Group may be unable to access credit markets, or may be able to access
them only on unfavourable terms;
- the Group has a significant amount of indebtedness, which could limit its
financial and operational flexibility;
- the Group is exposed to market risk including interest rate and foreign
currency risk;
- the Group is exposed to counterparty credit risk;
- the market for the Group`s real estate investments is relatively illiquid, and
may result in low disposal prices or an inability to sell certain properties;
- the Group`s consolidated balance sheet and income statement may be
significantly affected by fluctuations in the fair market value of the Group`s
properties as a result of revaluations;
- the Group may not be successful in completing development projects as planned,
or on commercially favourable terms;
- the Group`s joint ventures and other forms of co-ownership subject the Group
to certain risks of shared ownership and control of the properties affected;
- competition from new shopping centres, other retail premises and other retail
sales channels, including the internet, could have an adverse effect on the
Group`s business, financial condition and results of operations;
- external events beyond the control of the Group may have a negative impact on
footfall at the Group`s shopping centres;
- the Group is exposed to risks associated with having investments in the US and
India;
- the Group may face restrictions or liabilities under laws and regulations in
the jurisdictions in which it operates;
- the Group is exposed to potential claims relating to its leasing, selling and
developing of real estate;
- the Group`s success depends on attracting and retaining key personnel;
- the Group may become subject to disputes with tenants and other commercial
parties;
- the Group may be liable for environmental issues relating to its current and
former operations and properties;
- the Group may be insufficiently insured against all losses, damage and
limitations of use of its properties;
- there are tax and other risks associated with REIT status, substantial
shareholding and risk of close company status;
- the Group may incur additional compliance costs if certain European Directives
apply to REITs;
- the Group`s status as a REIT may restrict business opportunities;
- the Group has outstanding indemnity obligations to Capital & Counties
following the Demerger;
Risks related to the Acquisition:
- the Group may be unable to realise the benefits that it believes will result
from the Acquisition as a result of either completion not occurring or
regulatory intervention;
- CSC will not have full recourse to Peel under the Acquisition Agreement
against all potential liabilities in The Trafford Centre Group, whether
identified or unidentified;
- if the Acquisition becomes effective, existing CSC Shareholders will
experience a reduction in their proportionate ownership and voting interest in
the Ordinary Shares and Peel will have a significant degree of influence over
matters which may require Shareholder approval;
- the Acquisition may fail to realise anticipated benefits;
- the Group will be subject to increased asset concentration following the
acquisition of The Trafford Centre;
- The Trafford Centre acquisition will increase the Group`s indebtedness and
impact on the Group`s financing structure and debt maturity profile;
- as a result of The Trafford Centre Group`s current debt service coverage
ratio, The Trafford Centre Group is subject to certain restrictions under its
securitisation financing arrangements that may result in funds not being
available for use by the Enlarged Group;
Risks related to the Ordinary Shares:
- the Company`s share price may fluctuate;
- the Company may offer additional shares or securities in the future, which may
adversely affect the market price of the Ordinary Shares;
- the Company`s ability to continue to pay dividends will depend on revenue, the
level of profits, and cash flows generated by the Group;
- Shareholders may not be able to exercise pre-emption rights or participate in
future issues of Ordinary Shares and Shareholders outside the UK may not be able
to participate in future issues of Ordinary Shares;
- the ability of Overseas Shareholders to bring actions or enforce judgments
against the Company or the Directors may be limited; and
- there is a significant risk that the Company is treated as a passive foreign
investment company for US federal income tax purposes, which status will subject
US holders to adverse US federal income tax consequences.
APPENDIX 4
DESCRIPTION OF THE TRANSACTION DOCUMENTS
Placing and Sponsor `s Agreement
The Company, Merrill Lynch International, UBS Limited and RBS Hoare Govett have
entered into a Placing and Sponsor`s Agreement dated 25 November 2010 which sets
out the terms on which the Company has appointed (i) Merrill Lynch International
to act as Sponsor in relation to the Acquisition and its applications for
Admission; (ii) Merrill Lynch International and UBS Limited to act as joint
bookrunners and placing agents in connection with the Placing; and (iii) RBS
Hoare Govett to act as lead manager in connection with the Placing. The
agreement contains warranties and undertakings given by the Company which are
customary for an agreement of this kind. In addition, it contains indemnities
from the Company in favour of Merrill Lynch International, UBS Limited and RBS
Hoare Govett in respect of certain liabilities connected with the Admission and
other documentation issued to Shareholders and/or investors by or on behalf of
the Company in connection with the Placing, Admission, and the Acquisition,
which, again, are customary for an agreement of this kind. Pursuant to the
Placing and Sponsor`s Agreement, the Joint Bookrunners may, in their absolute
discretion terminate the agreement in certain limited circumstances prior to
Placing Admission. The Joint Bookrunners are not entitled to terminate the
Placing and Sponsor `s Agreement in respect of the Placing after Placing
Admission. Additionally, the Sponsor may, in its absolute discretion, terminate
its role as sponsor in certain circumstances, but only prior to Admission in
respect of the Consideration Shares.
Subject to the terms and conditions of the Placing and Sponsor`s Agreement,
Merrill Lynch International and UBS Limited have agreed to use reasonable
endeavours to procure Subscribers for the Placing and, to the extent that any
such Subscribers default, the Banks have agreed to subscribe themselves for such
Placing Shares.
The obligations of the Banks under the Placing and Sponsor`s Agreement in
respect of the Placing are subject to certain conditions being satisfied,
including, amongst others:
(i) the Company having complied with all its obligations and having satisfied,
in each case under the Placing and Sponsor`s Agreement or under the terms and
conditions of the Placing which fall to be performed or satisfied on or prior to
Placing Admission;
(ii) the warranties, representations and undertakings given by the Company in
the Placing and Sponsor `s Agreement being true and accurate and not misleading
on and as of the date of the Placing and Sponsor `s Agreement and at any time
prior to Placing Admission; and
(iii) Placing Admission becoming effective by not later than 8.00 a.m. (London
time) on 30 November 2010 (or such later time and/or date as the Company and the
Joint Bookrunners may agree).
If any of the conditions is not satisfied (or waived by the Joint Bookrunners in
their absolute discretion), then the Placing and Sponsor`s Agreement shall
terminate, without prejudice to any liability for any prior breach of the
agreement and pursuant to certain surviving provisions.
In addition, the Company has further agreed that, subject to certain customary
exceptions (including, inter alia, the issue of Ordinary Shares under the
Company`s share option schemes, the issue of Ordinary Shares on conversion of
the Convertible Bonds and the issue of Ordinary Shares as consideration for the
Acquisition and any other acquisition of business undertakings and real
property) between the date hereof and the date falling 90 days after Admission,
it will not, without the prior written consent of the Joint Bookrunners (i)
directly or indirectly, offer, pledge, sell, contract to sell, sell any option,
purchase any option, grant any option, right or warrant to acquire or otherwise
transfer or dispose of a portion of the share capital of the Company or any
interest therein; or (ii) enter into any arrangement which transfers to another,
in whole or in part, any of the economic consequence of ownership of a portion
of the share capital of the Company; or (iii) allow any subsidiary of the
Company to do any of the foregoing. The Joint Bookrunners have agreed that
neither they nor any person acting on their behalf will procure subscribers for
any of the Placing Shares other than in accordance with certain selling
restrictions.
Acquisition Agreement
On 25 November 2010, the Company and the Seller entered into an Acquisition
Agreement pursuant to which the Company will acquire the entire issued share
capital of The Trafford Centre Group and receive approximately GBP77* million in
cash in exchange for up to 167.3 million* Consideration Shares and an aggregate
nominal amount of up to GBP209.0 million* Convertible Bonds to be issued by the
Company.
The Consideration Shares
The Consideration Shares will be issued as fully paid and will rank pari passu
in all respects with the existing Shares, including the right to receive in full
all dividends and other distributions (if any) declared, made or paid after the
closing date of the Acquisition.
The Convertible Bonds
The Convertible Bonds will be perpetual subordinated bonds, convertible into
Ordinary Shares of the Company at the option of the bondholder any time from 2
years after completion of the Acquisition or earlier in certain limited
circumstances.
Conditions to Closing
The Acquisition Agreement is subject to satisfaction or waiver of certain
conditions, including:
(i) the passing by the Company`s Shareholders of the resolution to be proposed
at the Extraordinary General Meeting in connection with the Acquisition;
(ii) completion of the Placing;
(iii) the admission of the Consideration Shares to the Official List and to
trading on the London Stock Exchange;
(iv) completion of certain reorganisations relating to The Trafford Centre Group
(as described below); and
(v) there being no damage or destruction to The Trafford Centre which would have
a material adverse effect on The Trafford Centre Group and there being no damage
or destruction to the Group`s properties which would have a material adverse
effect on the Group.
The long stop date for the satisfaction or waiver of each condition is 31
January 2011.
Warranties and Indemnities
The Seller has given certain warranties and indemnities in relation to the
business and affairs of The Trafford Centre Group and The Trafford Centre. These
indemnities relate, among other things, to the net asset value of The Trafford
Centre Group as at 30 June 2010 and any payments and other leakage to the Wider
Peel Group since such date. The warranties and indemnities provided by the
Seller under the Acquisition Agreement are also subject to certain customary
limitations.
Guarantors
The Seller `s obligations will be guaranteed by the Seller Group and for 2 years
from completion by another member of the Wider Peel Group which is a holding
company in relation to the remainder of the Peel Group.
Conduct of business
The Acquisition Agreement includes restrictions regarding the conduct of the
business of The Trafford Centre Group pending completion of the Acquisition,
including a requirement to carry on business in the ordinary and usual course
and significant restrictions regarding any action taken in relation to The
Trafford Centre.
Reorganisation
The Trafford Centre Group currently comprises a part of the business of the Peel
Group. In order to be able to effect the sale of The Trafford Centre Group
pursuant to the Acquisition, the Peel Group will be subject to a reorganisation
to separate the assets and liabilities of The Trafford Centre Group from the
remainder of the Peel Group and certain other reorganisations relating to the
holding structure of The Trafford Centre Group within the Wider Peel Group. The
reorganisations are expected to be completed after the CSC Extraordinary General
Meeting but prior to completion of the Acquisition.
Ancillary agreements
The Acquisition Agreement obliges the Company and certain members of The
Trafford Centre Group and the Wider Peel Group to enter into ancillary
agreements at completion of the Acquisition. The ancillary agreements include
transitional services agreements, a co- existence agreement in respect of
intellectual property (including the right of the Peel Group to develop a centre
in Spain using the Trafford Centre name) and a master property agreement.
The master property agreement provides for (i) the sharing of neighbouring car
parks with properties owned by the Peel Group for a period of 15 years
(including associated restrictions and pre-emption rights in favour of the Group
during such period); and (ii) companies from the Peel Group who own adjacent
land not to seek planning permission or use any such land for any use which
would have a detrimental effect upon the value or operations of The Trafford
Centre.
The Relationship Agreement
On completion of the Acquisition, Peel will hold approximately 24.7 per cent. of
the Enlarged Issued Share Capital, assuming conversion of the Convertible Bonds.
To enable the Enlarged Group to operate as an independent listed company, CSC
and the Seller will enter into the Relationship Agreement which records the
terms of the proposed relationship between the Enlarged Group and
the Wider Peel Group and certain aspects of the governance of the Enlarged
Group.
The Relationship Agreement provides certain Board appointment rights to the
Seller. The Relationship Agreement also imposes certain restrictions on the
Wider Peel Group`s ability to deal in Ordinary Shares and the Convertible Bonds
(and other rights and instruments that are linked to Ordinary Shares) for a
prescribed period post-Admission. These provisions are described in more detail
below.
Independence and Related Party Transactions
The Relationship Agreement provides that the Seller and each other member of the
Wider Peel Group shall not take any action which precludes or inhibits any
member of the Enlarged Group from carrying on its business independently of the
Wider Peel Group. All transactions and relationships entered into between any
member of the Enlarged Group and any member of the Wider Peel Group are required
to be entered into or conducted on arms length terms, on a normal commercial
basis and in accordance with Chapter 11 of the Listing Rules.
Peel and the other members of the Wider Peel Group are required to abstain from
voting on any resolution of the Shareholders to approve any related party
transaction. Additionally for a three year period after completion of the
Acquisition, Peel and the other members of the Wider Peel Group are not
permitted to vote against certain resolutions tabled by the Board relating to
ordinary course business of the Company that is typically transacted on an
annual basis by listed companies. This restriction includes, amongst other
things, resolutions relating to Board elections and re-elections and ordinary
course authorisations to allot shares and disapply pre-emption rights.
The Wider Peel Group is also required to vote in favour of any future equity
capital raising by the Company (not exceeding GBP300 million) which relates to
the extension of the Group`s centres at Lakeside, Braehead or Nottingham.
Lock-up
During the 36 months period following completion of the Acquisition (the "Lock-
up Period"), restrictions are imposed upon Peel and the other members of the
Wider Peel Group acquiring or disposing of any Ordinary Shares or Convertible
Bonds (and other rights and instruments that are linked to Ordinary Shares) as
described below, in each case without the approval of the Board. There are also
limited restrictions on disposals in the two year period after the Lock-up
Period.
Standstill
During the Lock-up Period, Peel and the other members of the Wider Peel Group
are permitted to acquire Ordinary Shares (and other rights and instruments that
are linked to Ordinary Shares) provided the Wider Peel Group`s aggregate
shareholding in CSC does not exceed (i) 24.9 per cent. of the Enlarged Issued
Share Capital for the first 12 months following completion and (ii) up 29.9 per
cent of the Enlarged Issued Share Capital of CSC for the remainder of the Lock-
up Period, in each case assuming conversion of the Convertible Bonds. Such
percentage thresholds exclude treasury shares and shares held in respect of the
Company`s employee share plans which do not normally vote at general meetings of
the Company. Peel and each other member of the Wider Peel Group further agrees
not to announce or make an offer for the issued share capital of the Company
during such Lock-up Period.
These restrictions will not apply if a third party announces a firm intention to
make an offer for the Company under Rule 2.5 of the City Code or if Peel or
another member of the Wider Peel Group makes an offer which is recommended by
the Board.
If the Company issues further convertible bonds or other equity linked
instruments, the Wider Peel Group may participate in such issue during the Lock-
up Period provided its participation does not exceed its percentage interest in
the issued share capital of the Company at such time (assuming conversion of the
Convertible Bonds).
Under the terms of the Relationship Agreement neither Peel nor any other member
of the Wider Peel Group shall further during the Lock-up Period (i) act in
concert with anyone else in relation to CSC, (ii) solicit any other person to
make any offer for the Company`s Ordinary Shares, (iii) communicate with any
Shareholder so as to encourage them to vote against the Board or any action of
the Board in relation to the implementation of the Company`s business strategy
or (iv) acquire any debt securities of the Enlarged Group.
Disposals
Subject as below, neither Peel nor any other member of the Wider Peel Group will
be permitted to dispose of Ordinary Shares during the first 12 months of the
Lock-up Period.
Thereafter, the Wider Peel Group may dispose of Ordinary Shares save that in the
second 12 month period the Wider Peel Group is restricted from disposing of more
than 4.9 per cent. of the Enlarged Issued Share Capital to any single
shareholder. In the third 12 month period the Wider Peel Group is restricted
from disposing of more than 9.9 per cent. of the Enlarged Issued Share Capital
to any single shareholder. The Seller Group will not be permitted to dispose of
any Convertible Bonds at any point during the Lock-up Period. The Wider Peel
Group is also restricted in the 2 years after the Lock-up Period from disposing
of any Ordinary Shares to any single shareholder such that that shareholder
would then have an interest of 14.9 per cent. or more in the Ordinary Shares of
the Company without that shareholder making a takeover offer for all the
Ordinary Shares.
These restrictions will not prevent the Seller Group accepting or agreeing to
accept a takeover offer by a third party or granting security over its interests
in CSC for the purposes of financing its other business provided that voting
control under any such security arrangements must remain with the Seller Group
pending enforcement. The Seller Group intends to exercise this right. Ordinary
Shares may also be sold for the purpose of satisfying warranty and other claims
by the Buyer against the Seller.
Appointments to the Board of the Enlarged Group
The Seller will be entitled to appoint one Non-Executive Director to the Board
of the Company for so long as it continues to hold at least 10 per cent. of the
Enlarged Issued Share Capital. The first such appointee will be John Whittaker,
and for so long as John Whittaker continues to holds such appointment he shall
also be appointed Deputy Chairman of CSC.
The Seller`s entitlement to appoint a Non-Executive Director to the Board will
terminate upon the earlier of (i) the Seller Group ceasing to be controlled by
the Billown Trust (ii) the Ordinary Shares ceasing to be listed on the Official
List and traded on the London Stock Exchange and the JSE following a takeover or
(iii) any material non-compliance by the Wider Peel Group with the terms of the
Relationship Agreement and other arrangements entered into in connection with
the Acquisition.
Restrictions on the Company
As part of the Relationship Agreement the Company has agreed not to dispose of
its interest in The Trafford Centre during the Lock-up Period. It has further
agreed, subject to certain exceptions, not to materially change the management
and operational structure or to reduce the workforce at The Trafford Centre for
one year after completion of the Acquisition.
APPENDIX 5
TERMS OF THE CONVERTIBLE BONDS
The Company intends to issue up to GBP209.0 million* in aggregate nominal amount
of Convertible Bonds as part of the Acquisition. The Convertible Bonds will be
perpetual, subordinated obligations of the Company, and will be convertible at
the option of the holders into Ordinary Shares at any time from the date falling
2 years from the issue date, or earlier in certain limited circumstances set out
in further detail below. The Convertible Bonds will be issued in denominations
of GBP1,000.
Subordination
Claims of bondholders will, on a winding up of the Company, be subordinated to
the claims of all senior creditors of the Company, but will rank in priority to
the Ordinary Shares. Senior creditors of the Company means creditors who are
unsubordinated creditors of the Company or who are subordinated (other than
those claims that rank or are expressed to rank pari passu with or junior to the
claims of bondholders).
Interest and deferral of interest
The Convertible Bonds will bear interest at a rate of 4.076 per cent. per annum
payable semi- annually in arrear. The Company shall have the right to defer
payments of interest ("Deferred Interest") on the Convertible Bonds. Such
Deferred Interest may be paid by the Company in whole or in part at any time,
and any outstanding and unsatisfied Deferred Interest shall become payable in
full (i) on a redemption of the Convertible Bonds or (ii) in a winding up of the
Company. If the Company elects to defer a payment of interest on the Convertible
Bonds, the Company will not be permitted under the terms of the Convertible
Bonds to pay a cash dividend in respect of the Ordinary Shares until such time
as all Deferred Interest has been paid in full.
Conversion
The Convertible Bonds will be convertible at the option of the holders into
Ordinary Shares at any time from the date falling 2 years from the issue date,
or earlier in the following limited circumstances: (i) during the period of 60
days following the occurrence of a change of control of the Company; or (ii)
upon the announcement by certain third parties of a firm intention to acquire or
offer to acquire the whole of the issued share capital of the Company pursuant
to Rule 2.5 of the Takeover Code. In the case of (ii), the holder`s option to
convert will expire upon the offer the subject of the announcement being
withdrawn, lapsing or becoming wholly unconditional.
The initial conversion price will be 368 pence per Ordinary Share. The initial
conversion price may be adjusted downwards from time to time on the occurrence
of certain customary events in accordance with the terms and conditions of the
Convertible Bonds (the "Conditions").
Such events will include if the Company shall (i) carry out a reclassification
or subdivision or capitalisation in relation to the Ordinary Shares, (ii) make a
distribution in specie to holders of Ordinary Shares, (iii) carry out a rights
issue or bonus issue in respect of the Ordinary Shares at a price per Ordinary
Share which is less than 95 per cent. of the current market price per Ordinary
Share, (iv) issue Ordinary Shares at a price per Ordinary Share which is less
than 95 per cent. of the current market price per Ordinary Share, (v) issue
securities convertible into Ordinary Shares in circumstances where the
consideration per Ordinary Share receivable on conversion is less than 95 per
cent. of the current price per Ordinary Share, or (vi) modify the rights of
conversion or exchange or similar rights attaching to securities such that
following modification the consideration per Ordinary Share receivable is less
than 95 per cent. of the current price per Ordinary Share, all as will be more
fully described in the Conditions. There will also be an adjustment to the
conversion price if the Company pays a dividend in respect of its Ordinary
Shares in excess of GBP0.15 per Ordinary Share in respect of any fiscal year.
No fixed redemption
Although the Convertible Bonds do not have a fixed redemption date, the Company
may elect to redeem the Convertible Bonds at their principal amount, together
with accrued and unpaid interest and any outstanding and unsatisfied Deferred
Interest, on the third anniversary of the issue date or on any interest payment
date thereafter. The Company may also elect to redeem the Convertible Bonds at
their principal amount, together with accrued and unpaid interest and any
outstanding and unsatisfied Deferred Interest, at any time (i) if 85 per cent.
or more of the Convertible Bonds initially issued have been redeemed, converted
or purchased and cancelled, and (ii) following the expiry of a period of 60 days
after a change of control of the Company. A change of control shall occur if an
offer is made to Shareholders of the Company to acquire all or a majority of the
issued ordinary share capital of the Company and (such offer having become or
been declared unconditional in all respects) the right to cast more than 50 per
cent. of the votes which may ordinarily be cast on a poll at a general meeting
of the Company has or will become unconditionally vested in any offeror.
Bondholders shall have no right to require redemption of the Convertible Bonds
at any time.
Events of default limited
An event of default under the Convertible Bonds will occur only if there is a
failure to pay principal or interest in respect of the Convertible Bonds when
due, or in the event of winding up of the Company. A deferral of interest will
not constitute an event of default. In the case of an event of default the
remedies available to Bondholders are limited to initiating proceedings for the
winding-up of the Company and/or proving in a winding-up.
Tax
All payments made by or on behalf of the Issuer in respect of the Convertible
Bonds will be made subject to and after deduction or withholding on account of
any taxes. The Convertible Bonds will not contain a tax call.
Listing and trading
The Company intends to make an application for the admission to listing of the
Convertible Bonds on the official list of the FSA and to trading on the
Professional Securities Market of the London Stock Exchange no later than the
first interest payment date.
APPENDIX 6
INFORMATION RELATING TO THE TRAFFORD CENTRE GROUP
History and development of the Trafford Centre Group
The Trafford Centre was opened to the public in September 1998. Since that date
visitor numbers have grown partly as a result of the continued development of
The Trafford Centre and the improved tenant mix over time. For example, in May
2005 a third anchor tenant, John Lewis, was added to The Trafford Centre in
addition to the existing anchors, Selfridges and Debenhams. In March 2007, a
significant redevelopment of the main entrance of The Trafford Centre created a
new leisure and dining area known as The Great Hall and in March 2008 a major
240,000 sq. ft. extension known as Barton Square was added. Barton Square is a
major homeware and leisure destination, including anchor tenants such as M&S
Home, Next Home and Bhs. It also includes the UK`s first Legoland Discovery
Centre, which opened in March 2010.
Construction of the Trafford Centre
The design for The Trafford Centre was created by the firm of architects,
Chapman Taylor Partners. The detailed design was created by the firm of
architects, Leach Rhodes Walker. The fabric of The Trafford Centre comprises
steel frame construction with brick external walls and internal concrete
blockwork walls and jumbo stud partitions under an insulated concrete and metal-
decked roof. The roofs over the malls and the domes are glazed.
The finishes to the malls include granite slab flooring and skirting, painted
and plastered walls and suspended ceilings. Planting with semi-mature trees and
evergreen plants was originally provided throughout The Trafford Centre and
these have matured since opening. The Trafford Centre was designed and built
with future flexibility in mind. A consequence of the design is that the net
lettable area of The Trafford Centre has increased since opening by the addition
of some mezzanine floors. Additional mezzanine floors can be added to most of
the retail units. In addition, the structure of the building will permit the
construction of an additional storey over the department stores occupied by
Debenhams, Selfridges and John Lewis, subject to obtaining planning consent.
Practical completion of The Trafford Centre was certified in sections over the
period from December 1997 to September 1998.
Description of the Trafford Centre
The Trafford Centre comprises the following key features and tenants:
- the department stores occupied by Selfridges, Debenhams and John Lewis;
- other major tenants include: Marks & Spencer, Boots and Bhs;
- the remaining retail units located in two malls known as Regent Crescent and
Peel Avenue and in a central area between the malls known as the Central Dome;
- an area of approximately 28,867 square metres (approximately 310,000 square
feet) which has been devoted to catering and leisure which is located
predominantly within the themed sections of The Trafford Centre, known as The
Orient and The Great Hall;
- an Odeon Multiplex Cinema which is accessed from The Orient;
- a major homeware and leisure extension, known as Barton Square;
- the Premier Travel Inn Hotel, which also contains a Brewsters restaurant and
bar, situated in the part of the grounds of The Trafford Centre known as
Wilderspool Wood;
- a restaurant situated on the north side of Wilderspool Wood known as "The
Orangery" and occupied by Frankie and Bennys; and
- the car parks, roads, service areas, bus station, petrol filling station,
offices and landscaped areas comprised within the 142 acres of The Trafford
Centre.
The Trafford Centre has a catchment area of approximately 8.9 million people
within 70 minutes` drive time and has experienced consistent footfall growth
since opening; including an estimated 10 per cent. increase in footfall for the
period 1 January 2010 to 30 September 2010, compared to the equivalent period in
2009. It is estimated that The Trafford Centre attracts over 35 million customer
visits per annum, of which over 69 per cent. of visitors to The Trafford Centre
fall within ABC1 occupation groups (as defined by the Market Research Society).
Approximately 22 per cent. of visitors visit The Trafford Centre at least once
per week and approximately 61 per cent. of visitors visit The Trafford Centre at
least once per month.
Location and access
The Trafford Centre is located approximately six miles west of Manchester city
centre in the North West of England.
The Trafford Centre has excellent road links onto the M60 motorway (the
Manchester Outer Ring Road) which provides access to the national motorway
network and to towns in the North West of England and to Leeds and Birmingham.
The Trafford Centre benefits from approximately 10,000 car and 350 coach parking
spaces and from a bus station with capacity for up to 120 buses per hour.
Key strengths of The Trafford Centre Group
The Directors believe that the key strengths of The Trafford Centre Group are as
follows:
- the quality of The Trafford Centre, one of the UK`s pre-eminent regional
shopping centres and Barton Square, a major homeware and leisure destination
adjacent to The Trafford Centre;
- the prime quality, scarcity value and strong competitive position of The
Trafford Centre means that it is unlikely to be substantially challenged for a
sustained period, given the sharp reduction in the retail supply pipeline and
limited investment in similar development projects in the vicinity;
- limited exposure in the majority of The Trafford Centre to the most difficult
sectors of the retail market;
- as at 30 September 2010 occupancy was 98 per cent. by rent;
- strong footfall which has continued to increase with visitor numbers estimated
to have increased 10 per cent. for the period 1 January 2010 to 30 September
2010, compared to the equivalent period in 2009;
- The Trafford Centre Group`s lease expiry profile is robust. Based on rental
income and assuming no exercise of break clauses, 25.6 per cent. of leases are
due for expiry over the next five years and approximately half of leases expire
within the next ten years; and
- a committed management team who have considerable experience in the retail
letting sector.
Property interests
The Trafford Centre Group`s property assets were externally valued at GBP1.65
billion as at 1 November 2010, which represents a decrease of 2.1 per cent. on
the previous directors` valuation as at 31 March 2010.
Revenue for the year ended 31 March 2010 was GBP98.7 million, GBP5.0 million or
4.8 per cent. lower than the year ended 31 March 2009, reflecting the higher
level of voids at The Trafford Centre as a result of the recession. Management
of The Trafford Centre has been actively working to address occupancy levels and
as at 30 September 2010 The Trafford Centre`s occupancy level was 98 per cent.
by rent and there were five void units. Since 31 March 2010, there have been ten
new lettings where solicitors have been instructed and/or terms have been issued
and five administrations exchanged.
Letting activity has been a key focus for management over the year to 30
September 2010 as The Trafford Centre Group sought to manage its tenant mix
following a number of tenants entering administration during the recession
creating a higher level of voids than previously experienced. The Trafford
Centre made 35 tenancy changes in the year to 30 September 2010, involving
GBP3.0 million of new annual passing rent. These tenancy changes included 24 new
lettings of which 16 are long-term lettings, five short-term lettings (five
years or less) and three turnover only transactions. Despite the pressures
within the retail sector, management of The Trafford Centre has sought not to
compromise on tenant mix which management believes has been a key factor in the
success of The Trafford Centre in leasing many of the void units to high quality
tenants rather than "discount" brands.
The Trafford Centre`s retailer mix is diverse: the top 20 tenants account for
37.7 per cent. of the Trafford Centre`s rent roll. National or international
multiple retailers represent over 95 per cent. of the rent roll.
Rent review settlements have been agreed in line with The Trafford Centre
Group`s expectations and the successful conclusion of the 2008 rent review
programme resulted in a healthy rent roll which, coupled with the success in
letting the significant majority of void units, put The Trafford Centre in a
very strong position. As at 30 September 2010, there were five and eleven rent
reviews under negotiation in relation to 2009 and 2010 respectively.
Despite the challenging retail environment, management of The Trafford Centre
has resisted several tenants` requests for monthly payment plans and, as a
result, 92 per cent. of the September 2010 quarterly rent was collected within
22 days.
Asset and centre management initiatives are ongoing at The Trafford Centre.
Notable management initiatives taken in recent years are as follows:
- the development of the Barton Square extension to The Trafford Centre, which
has contributed to increasing footfall at The Trafford Centre since its opening
in 2008;
- opening the UK`s first Legoland Discovery Centre in Barton Square which has
improved footfall whilst demonstrating the power of a children`s attraction to
generate visitor numbers and generate interest from other potential tenants;
- significant reductions in the cost base to ensure that The Trafford Centre
offers value for money to all tenants. The Trafford Centre service charge has
been reduced by a further GBP1 million in the year to March 2010 which when
coupled with the reductions in 2009 and those projected for 2011 is expected to
result in a reduction in real terms of approximately 20 per cent. over three
years; and
- improvements over the last two years in the impact The Trafford Centre has on
the environment such that The Trafford Centre Group received the Sceptre Award
for Environmental Management 2010. Since opening The Trafford Centre, its
management has realised significant reductions in energy consumption and the
levels of waste sent to landfill. By the end of the current calendar year, The
Trafford Centre Group expects to be recycling 85 per cent. of the waste produced
at The Trafford Centre.
Top tenants
The following table sets out The Trafford Centre`s top 20 tenants as at 1
November 2010:
Rank Tenant group Per cent. Rent
1 Arcadia .........................................................4.6%
2 Selfridges ......................................................3.1%
3 Next ............................................................3.0%
4 Bhs .............................................................2.8%
5 Marks & Spencer .................................................2.7%
6 Debenhams .......................................................2.5%
7 H&M .............................................................2.4%
8 Odeon ...........................................................1.9%
9 Boots ...........................................................1.8%
10 W H Smith .......................................................1.5%
11 John Lewis ......................................................1.4%
12 River Island ....................................................1.4%
13 Moss Bros Group .................................................1.3%
14 HMV .............................................................1.2%
15 Zara ............................................................1.1%
16 Waterstones .....................................................1.0%
17 Hollister .......................................................1.0%
18 Monsoon/Accessorize..............................................1.0%
19 JJB Sports ......................................................1.0%
20 Republic ........................................................1.0%
Total for top 20 tenants .......................................37.7%
Lease maturities
The following table sets out the lease maturity pattern as at 1 November 2010:
2010 2011 2012 2013 2014 2015
Percentage of total
rental income 0.12 0.81 0.53 20.09 2.16 3.32
2016 2017 2018 2019+
Percentage of total
rental income 1.49 2.80 8.94 59.73
Rent review cycles
The following table sets out the rent review pattern as at 1 November 2010:
Retail Units
2010 2011 2012 2013 2014
Percentage of total Trafford
Centre Group rental
income 5.71 7.97 8.22 37.67 4.91
Net rental income
The following table provides selected information on the categories forming the
net rental income of The Trafford Centre:
Percentage of
net rental
income
By type of unit as at 1 November 2010
SU 61.66
MSU 15.06
Catering and leisure 13.64
Anchor 9.64
By sales category as at 30 June 2010
Mixed: ladies and menswear 18.91
Anchor 12.55
Ladieswear 10.46
Footwear 6.71
Menswear 4.50
Jewellery 3.84
Phone retailers including mobiles 3.55
Books/Cards 3.44
Other 36.04
Management and employees
The Trafford Centre Group is an autonomous, self contained sub group within the
overall Peel Group. It has its own managing director and employees and operates
on a stand-alone basis, independent of the larger group.
As at 31 March 2010, The Trafford Centre Group employed in total 412 employees
compared to 417 as at 31 March 2009.
Financing
The Trafford Centre Group is financed predominately through secured loan notes
with final repayment dates from 2015 to 2035. Of the approximately GBP763
million secured loan notes outstanding as at 31 March 2010, GBP484 million were
fixed rate, with a weighted average rate of interest of 6.2 per cent.,
marginally increasing CSC`s weighted average interest rate to 5.8 per cent.
from 5.7 per cent. The remaining GBP279 million of secured loan notes are
variable rate. However, The Trafford Centre Group has entered into interest rate
swaps which hedge the exposure to fluctuations in the underlying variable rate.
In addition to the secured loan notes, The Trafford Centre Group has a bank loan
of GBP81 million which is secured upon Barton Square. This facility is a
floating rate facility which matures in 2012.
In total, 90 per cent. of Trafford Centre`s debt facilities were either fixed or
hedged as at 31 March 2010.
There are no loan to value (LTV) covenants contained in The Trafford Centre`s
debt facilities.
The secured loan notes include a debt service coverage ratio (DSCR) test,
calculated as rental income to debt service (recurring interest expense plus
debt amortisation), with a restriction on surplus cash usage except for
development when the DSCR is below 1.4:1, and with limitations on the use of
surrenders premiums when the DSCR is under 1.3:1. At 30 June 2010, Trafford
Centre`s DSCR ratio was 1.13:1.
The Trafford Centre Group had cash and cash equivalents of GBP44 million as of
31 March 2010, including GBP9 million of restricted cash.
Financial information
The following table summarises The Trafford Centre Group`s results of operations
for each of the three years ended 31 March 2010:
Year ended 31 Year ended 31 Year ended 31
March 2010 March 2009 March 2008
(GBP`000) (GBP`000) (GBP`000)
Continuing operations
Revenue 98,702 103,652 91,644
Net rental income 82,921 87,210 75,307
Administrative expenses (4,689) (8,453) (3,076
Sale of investment and
development property 400 - -
Revaluation of investment property 198,711 (410,143) 741
Operating profit/(loss) 277,343 (331,386) 72,972
Loss on disposal of fixed assets - - (3)
Finance income 83 1,453 6,344
Finance costs (53,248) (55,963) (55,590)
Change in fair value of
derivative financial instruments 12,547 (39,678) (8,395)
Profit/(loss) before tax 236,725 (425,574) 15,328
Taxation (66,096) 119,067 23,032
Profit/(loss) for the year
from continuing operations 170,629 (306,507) 38,360
The following table sets forth certain key financial ratios and selected
components of The Trafford Centre Group`s balance sheets as at 31 March 2010,
2009 and 2008.
As at 31 March
2010 2009 2008
(GBP`000) (GBP`000) (GBP`000)
Investment property 1,678,421 1,477,160 1,881,429
As at 31 March
2010 2009 2008
(GBP`000) (GBP`000) (GBP`000)
Gross debt 847,524 871,100 878,915
Net debt 803,288 824,041 818,432
Net assets, adjusted for
financial derivatives and
deferred tax on revalued
assets, derivatives and
capital allowances 806,830 588,541 981,733
Interest cover (excluding
impact of derivatives and
revaluations) 147% 144% 147%
Secured debt to secured assets 50% 58% 46%
Weighted average interest rate 6.3% 6.4% 6.8%
Proportion of debt with interest
rate hedged 90.0% 89.9% 91.3%
APPENDIX 7
VALUATIONS AS AT 1 NOVEMBER 2010
The following table provides selected information on CSC, The Trafford Centre
and Barton Square from the Valuation Reports:
As at 1 November 2010
Nominal
Equivalent
Ownership Market value Initial Yield Yield
(per cent.) (GBPm) (per cent.)
The Trafford
Centre 100 1,560 5.01 5.58
Barton Square 100 85 4.85 5.51
Land 100 5 N/A N/A
Total 1,650
As at 1 November 2010
Nominal
Equivalent
Ownership Market value Initial Yield Yield
(per cent.) (GBPm) (per cent.)
Out-of-town shopping
centres Lakeside,
Thurrock 100 1,025 5.32 5.90
Metrocentre,
Gateshead 90 (1) 810 5.96 6.65
Braehead,
Glasgow 100 569 5.27 6.22
The Mall at Cribbs
Causeway, Bristol 33 (2) 220 5.43 6.12
Total out-of-town centres 2,624
In-town shopping centres
The Harlequin, Watford 93 352 5.06 6.65
The Arndale,
Manchester 48 (3) 328 5.84 6.13
Victoria Centre,
Nottingham 100 326 5.44 6.60
Eldon Square, Newcastle 60 244 4.42 7.16
St David`s, Cardiff 50 237 3.24 6.40
Chapelfield, Norwich 100 233 5.15 6.90
The Chimes, Uxbridge 100 214 6.09 6.60
The Potteries,
Stoke-on-Trent 100 201 6.49 7.25
The Glades, Bromley 64 177 5.68 7.25
Other (4) 49
Total in-town
shopping centres 2,361
Total
Investment and
Development Property 4,985 5.39 6.46
Notes:
(1) Interest shown is that of the Metrocentre Partnership in the Metrocentre (90
per cent.) and the Metro Retail Park (100 per cent.). CSC has a 60 per cent.
interest in the Metrocentre Partnership, which is consolidated as a subsidiary
of the Group.
(2) CSC`s interest is through a joint venture ownership of a 66 per cent.
interest in the Mall at Cribbs Causeway and a 100 per cent. interest in The
Retail Park, Cribbs Causeway.
(3) CSC`s interest is through a joint venture ownership of a 95 per cent.
interest in the Arndale, Manchester, and a 90 per cent. interest in New
Cathedral Street, Manchester.
(4) Includes the Group`s 50 per cent. economic interest in Xscape, Braehead.
APPENDIX 8
UNAUDITED PRO FORMA STATEMENT OF NET ASSETS
The unaudited pro forma statement of net assets set out below has been prepared
to illustrate the effect of the Placing and the Acquisition as if those events
had taken place as at 30 June 2010. The unaudited pro forma statement of net
assets, which has been produced for illustrative purposes only, by its nature
addresses a hypothetical situation and, therefore, does not represent the
Group`s actual financial position or results. The unaudited pro forma statement
of net assets is presented on the basis of the accounting policies adopted by
the Group in preparing the unaudited interim report for the half year ended 30
June 2010. The unaudited pro forma statement of net assets has been prepared on
the basis set out in the notes below and in accordance with the requirements of
items 1 to 6 of Annex II to the PD Regulation and item 13.3.3R of the Listing
Rules of the UK Listing Authority.
The statement below assumes a Placing Price of 368 pence and the issue of 62.3
million Placing Shares; however, the Placing proceeds and the cash component of
the Acquisition will ultimately depend on the actual Placing Price and the
actual number of Placing Shares issued (to be determined by an accelerated
Bookbuild process).
Adjustments
Trafford
Centre
Group
CSC
30 June 31 March
2010 (1) Placing (2) 2010 (3)
(GBPm) (GBPm) (GBPm)
Assets
Investment, development and trading
properties 4,915.5 - 1,678.4
Goodwill - - -
Cash and cash equivalents 127.7 224.3* 44.2
Investments 48.0 - -
Derivative financial instruments 23.0 - 0.2
Trade and other receivables 111.0 - 19.0
C&C US - assets 429.6 - -
Other assets 8.2 - 0.4
Total assets 5,663.0 224.3* 1,742.2
Liabilities
Borrowings (2,884.5) - (847.5)
Trade and other payables (216.0) - (77.4)
Derivative financial instruments (413.5) - (24.3)
Capco US - liabilities (285.6) - -
Deferred tax - - (343.8)
Other liabilities (1.4) - -
Total liabilities (3,801.0) - (1,293.0)
Net assets 1,862.0 224.3* 449.2
Net assets (diluted, adjusted) (5) 2,309.1
Net external debt (6) 2,622.4
Loan to value (7) 53%
Diluted number of shares (million) (8) 626.7
Net assets per share (diluted, adjusted) (9) 368p
Other
adjustments (4) Pro forma
(GBPm) (GBPm)
Assets
Investment, development and trading properties 21.9 6,615.8
Goodwill 10.8 10.8
Cash and cash equivalents 72.1* 468.3*
Investments (5.0) 43.0
Derivative financial instruments - 23.2
Trade and other receivables 12.8 142.8
C&C US - assets - 429.6
Other assets - 8.6
Total assets 112.6* 7,742.1*
Liabilities
Borrowings 5 .0 (3,727.0)
Trade and other payables (33.0) (326.4)
Derivative financial instruments - (437.8)
Capco US - liabilities - (285.6)
Deferred tax 343.8 -
Other liabilities - (1.4)
Total liabilities 315.8 (4,778.2))
Net assets 428.4* 2,963.9*
Net assets (diluted, adjusted) (5) 3,431.9*
Net external debt (6) 3,124.3*
Loan to value (7) 47%*
Diluted number of shares (million) (8) 913.1*
Net assets per share (diluted, adjusted) (9) 376p*
* indicates the values which are calculated by reference to, and therefore will
ultimately depend on, the actual Placing Price and the actual number of Placing
Shares issued (both of which are to be determined in the Bookbuild).
Notes:
(1) The financial information of the Group has been extracted without material
adjustment from the unaudited interim report of Group for the half year ended 30
June 2010.
(2) The proceeds of the placing are calculated on the basis that the Group
issues 62.3* million new ordinary shares at 368* pence per share, net of costs
of GBP5.0 million.
(3) The financial information of The Trafford Centre Group has been extracted
without material adjustment from the historical financial information of The
Trafford Centre Group.
(4) Adjustments to reflect the acquisition and consolidation of The Trafford
Centre Group are included as follows:
(a) Pre-acquisition adjustment to reflect the fact that a liability of GBP12.8
million recognised in the 31 March 2010 Trafford balance sheet will be met by
the Peel Group as it falls due under the terms of one of the ancillary documents
to the Acquisition Agreement. This results in the recognition of an asset of
GBP12.8 million within trade and other receivables.
(b) Investment and development property valuations have been updated to 1
November 2010 resulting in an adjustment of GBP21.9 million representing an
increase of GBP57.9 million in respect of the Group investment and development
property and a decrease of GBP36.0 million in respect of The Trafford Centre
Group investment and development property.
(c) On acquisition, as part of Enlarged Group, The Trafford Centre Group
automatically enters the REIT regime. As such a REIT entry charge liability of
GBP33.0 million, based on the market value of the acquired property at 1
November 2010, is recognised in trade and other payables and the deferred tax
position is revised to reflect the changed tax position resulting in a reduction
in the deferred tax liability of GBP343.8 million.
(d) As part of the Acquisition the shareholders of The Trafford Centre Group
will subscribe GBP77.1* million for Consideration Shares and Convertible Bonds
which is reflected as an increase in cash.
(e) Acquisition costs of GBP5.0 million are reflected as a movement in cash.
(f) Reclassification of GBP5.0 million of investments held by Group to eliminate
against borrowings of The Trafford Centre Group.
(g) Acquisition accounting adjustments would be required when reflecting the
acquisition in the Group financial statements under IFRS. No estimation has been
made of the fair value adjustments that would be required at the date of
acquisition as these are dependent upon values at that date. Consideration
consists in effect of 155.0 million Consideration Shares and GBP177.2 million
Convertible Bonds. An estimation of the fair value of the shares issued as
consideration has been made based on the Group`s published adjusted, diluted net
assets per share of 368 pence at 30 June 2010. The fair value of the shares
issued as consideration will be recalculated for acquisition accounting purposes
based on the share price at the date the acquisition completes. The difference
between the consideration and the net assets of The Trafford Centre Group
results in goodwill of GBP10.8 million that would be recognised on the balance
sheet and is calculated as follows:
GBPm
Consideration:
Shares 570.4
Perpetual convertible bond 177.2
747.6
Adjusted net assets:
At 31 March 2010 449.2
Pre-acquisition adjustment(4a) 12.8
Investment and development property adjustment(4b) (36.0)
Taxation/REIT adjustments(4c) 310.8
736.8
Goodwill 10.8
(5) Net assets (diluted, adjusted) has been calculated as equity shareholders`
funds, diluted for the effects of unexercised share options and convertible
bonds, adjusted for the unrecognised surplus on trading properties, fair value
of derivative financial instruments, deferred tax on investment and development
property, the non-controlling interest on these adjustments and non- controlling
interest recoverable balances not recognised.
(6) Net external debt represents total borrowings less the GBP134.4 million
compound financial instrument relating to the 40 per cent, third party interest
in Metrocentre less cash and cash equivalents, as detailed in the table below:
Adjustments
Trafford Centre
CSC 30 June Group
2010 Placing 31 March 2010
Borrowings 2,884.5 - 847.5
Metrocentre compound
financial instrument (134.4) - -
Gross external debt 2,750.1 - 847.5
Other
adjustments Pro forma
Borrowings (5.0) 3,727.0
Metrocentre compound
financial instrument - (134.4)
Gross external debt (5.0) 3,592.6
Adjustments
Trafford Centre
CSC 30 June Group
2010 Placing 31 March 2010
Cash and cash equivalents (127.7) (224.3) (44.2)
Net external debt 2,622.4 (224.3) 803.3
Other
adjustments Pro forma
Cash and cash equivalents (72.1) (468.3)
Net external debt (77.1) 3,124.3
(7) The loan to value ratio has been calculated as the ratio of net external
debt to the total value of investment, development and trading properties,
updated for the 1 November 2010 property valuations.
(8) The unadjusted diluted number of shares represents the Group`s issued share
capital at 30 June 2010 adjusted for treasury shares and those held in the ESOP,
diluted for the effects of unexercised share options and convertible bonds. This
number of shares is further adjusted for the effects of the transaction,
including the issue of Consideration Shares, the dilution impact of the
Convertible Bonds issued as consideration, and the issue of the Placing Shares.
(9) Net assets per share (diluted, adjusted) is calculated by dividing the net
assets (diluted, adjusted) by the diluted number of shares.
(10) No account has been taken of the results and financial performance of Group
since 30 June 2010, nor of The Trafford Centre Group since 31 March 2010, other
than the updated investment and development property valuations as at 1 November
2010.
APPENDIX 9
DEFINITIONS
In this Announcement, the following expressions have the following meaning
unless the context otherwise requires:
Acquisition the acquisition of the entire issued share
capital of The Trafford Centre Group by CSC,
including the Subscription
Acquisition Agreement the agreement dated 25 November 2010 between
the Company, the Seller and others relating
to the Acquisition
acting in concert has the meaning given to it in the Takeover
Code
Admission together, UK Admission and SA Admission
Admission and Disclosure the ``Admission and Disclosure Standards``
Standards of the London Stock Exchange containing,
among other things, the admission
requirements to be observed by companies
seeking admission to trading on the London
Stock Exchange`s main market for listed
securities
Affiliate any holding company, subsidiary, branch or
associated undertaking (including, without
limitation, joint venture partners) from
time to time or any subsidiary, branch or
associated undertaking (including, without
limitation, joint venture partners) of any
such holding company from time to time
Banks Merrill Lynch International, UBS Limited and
RBS Hoare Govett
Billown Trust the Billown Settlement Trust
Board the board of directors of CSC
Bookbuild the bookbuilding process undertaken by the
Joint Bookrunners to procure Subscribers for
the Placing Shares
Capital & Counties or Capco Capital & Counties Properties plc and/or its
subsidiaries
certificated or in where a share or other security is not in
certificated form uncertificated form
CBRE CB Richard Ellis Ltd.
CMBS commercial mortgage backed securities notes
Company or CSC Capital Shopping Centres Group PLC, a
company incorporated under the laws of
England and Wales (registered under no.
03685527), with its registered office at 40
Broadway, London SW1H 0BT and registered as
an external company in South Africa
(registered under No. 1999/012910/10), with
its registered external office at 4th Floor,
Liberty Life Centre, 1 Ameshoff Street, 2001
South Africa
Consideration Shares up to 167,316,817 ordinary shares of 50p
each in the share capital of the Company to
be issued to the Sellers in consideration
for the Acquisition
Convertible Bonds up to GBP208,753,000 4,076 per cent.
perpetual subordinated convertible bonds to
be issued by the Company to the Sellers in
consideration for the Acquisition
Corporate Governance Code the UK Corporate Governance Code published
by the Financial Reporting Council, as in
force from time to time
CREST the relevant system, as defined in the
Uncertificated Securities Regulations 2001
(SI 2001/3755) (in respect of which
Euroclear UK & Ireland Limited is the
operator)
Cushman & Wakefield Cushman & Wakefield LLP
Demerger the demerger of the business of Capital and
Counties
Directors the Executive Directors and Non-Executive
Directors
DTZ DTZ Debenham Tie Leung Limited
Enlarged Group the Group as enlarged by the Acquisition
Enlarged Issued Share Capital the Company`s ordinary issued share capital
following the issue of the Placing Shares
and the Consideration Shares, excluding
treasury shares
ERV (estimated rental value) the external valuers` estimates of the
current annual market rent of all lettable
space net of any non-recoverable charges,
before bad debt provision and adjustments
required by International Accounting
Standards regarding tenant lease incentives
EU or European Union the European Union
Executive Directors the executive directors of CSC
Existing Shares the Ordinary Shares in issue as at the date
of this document, excluding treasury shares
Extraordinary General Meeting the extraordinary general meeting of the
Company
Financial Services Authority the Financial Services Authority of the
or FSA United Kingdom
Form of Proxy the form of proxy for Shareholders in
relation to the Extraordinary General
Meeting
FSMA the Financial Services and Markets Act 2000,
as amended
Group CSC and, where appropriate, its subsidiaries
from time to time
IFRS International Financial Reporting Standards
as issued by the International Accounting
Standards Board
J.P. Morgan Cazenove J.P. Morgan plc, which conducts its UK
investment banking activities as J.P. Morgan
Cazenove
Johannesburg Stock Exchange or JSE Limited (Registration number
JSE 2005/022939/06), a company duly registered
and incorporated with limited liability
under the company laws of South Africa,
licensed as an exchange under the Securities
Services Act, 2004 (Act 36 of 2004)
Joint Bookrunners Merrill Lynch International and UBS Limited
Knight Frank Knight Frank LLP
LIBOR London Interbank Offer Rate
Listing Rules the Listing Rules made by the FSA under Part
VI of FSMA
London Stock Exchange London Stock Exchange plc
Major Space Users a lessee of greater than 10,000 sq. ft. of
space
Merrill Lynch International or Merrill Lynch International of 2 King Edward
Sponsor Street, London EC1A 1HQ
Merrill Lynch South Africa Merrill Lynch South Africa (Pty) Limited
Money Laundering Regulations the Money Laundering Regulations 2007 (SI
2007/2157)
Net Asset Value NAV net asset value per Ordinary Share
New Ordinary Shares the Consideration Shares and the Placing
Shares
nominal equivalent yield the effective annual yield to a purchaser
from the assets individually at market value
after taking into account notional
acquisition costs but assuming rent is
receivable annually in arrears rather than
reflecting the actual rental cash flows
Non-Executive Directors the non-executive directors of CSC
Official List the Official List of the FSA pursuant to
Part VI of FSMA
Olayan Group the owner of 27 per cent. of the Peel Group.
Ordinary Shares or Shares the ordinary shares of 50p each in the share
capital of the Company (including, if the
context requires, the New Ordinary Shares)
Overseas Shareholders Shareholders with registered addresses
outside the United Kingdom or who are
citizens or residents of countries outside
the United Kingdom
Part VI Rules the rules contained in Part VI of the FSMA
passing rent The share of contracted annual rents
receivable at the balance sheet date. This
takes no account of accounting adjustments
made in respect of rent free periods or
tenant incentives, the reclassification of
certain lease payments as finance charges or
any irrecoverable costs and expenses, and
does not include excess turnover rent,
additional rent in respect of unsettled rent
reviews or sundry income such as from car
parks or similar
Peel or the Sellers the Seller and Peel Holdings (TTC) Limited
Peel Group Peel and Peel Holdings Limited, a company
incorporated in the Isle of Man (registered
no. 002567V), and their respective
subsidiaries from time to time, including
prior to the Acquisition, The Trafford
Centre Group
Peel Holdings (TTC) Limited Peel Holdings (TTC) Limited, a company
incorporated in the Isle of Man (registered
no. 6199V)
Placing the placing of the Placing Shares by the
Joint Bookrunners, on behalf of the Company,
to both institutional and certain other
investors
Placing Admission the admission of the Placing Shares to
listing on the Official List of the
Financial Services Authority and to trading
on the main market of the London Stock
Exchange
Placing and Sponsor`s the placing and sponsor`s agreement dated 25
Agreement November 2010 between the Company, Merrill
Lynch International, UBS Limited and RBS
Hoare Govett in respect of the Placing and
Admission.
Placing Press Announcement or this announcement dated 25 November 2010
Announcement
Placing Price the price at which the Placing Shares are
issued, to be determined at the close of the
Bookbuild.
Placing Shares the Ordinary Shares of 50p each in the share
capital of the Company to be issued in
connection with the Placing, such number to
be determined at the close of the Bookbuild.
pounds sterling or GBP the lawful currency of the United Kingdom
Proposed Director John Whittaker, to be appointed following
the completion of the Acquisition
Prospective Directive EU Prospectus Directive (2003/7 1/EC)
RBS Hoare Govett RBS Hoare Govett Limited of 250 Bishopsgate,
London EC2M 4AA
Real Estate Investment Trust a Real Estate Investment Trust as defined in
or REIT Part 12 of the Corporation Tax Act 2010
Record Date expected to be 12 noon on 18 December 2010
Regulation S Regulation S under the US Securities Act
Regulatory Information Service one of the regulatory information services
authorised by the UK Listing Authority to
receive, process and disseminate regulatory
information in respect of listed companies
Relationship Agreement the relationship agreement between CSC and
the Seller to be dated the date of
completion of the Acquisition
SA Admission admission, in accordance with the JSE
Listing Requirements, of the Consideration
Shares and/or the Placing Shares, as the
context requires, to the Main Board of the
JSE
SA Register the branch register of members of the
Company in South Africa
Seller Tokenhouse Holdings (IoM) Limited, a company
incorporated under the laws of Isle of Man
(registered no. 2118V), one of the holding
companies of the Peel Group
Seller Group the Sellers and any of their wholly-owned
subsidiaries from time to time
Senior Management the senior management of the Group
SENS the Securities Exchange News Service of the
Johannesburg Stock Exchange
Shareholder holder of Ordinary Shares
South Africa the Republic of South Africa
sq. ft. square feet
Subscriber any person (including individuals, funds or
otherwise) by whom or on whose behalf a
commitment to subscribe for Placing Shares
has been given
Subscription the subscription by Peel of approximately
GBP77 million* in cash for the Consideration
Shares and the Convertible Bonds as part of
the Acquisition
Takeover Code or Code the City Code on Takeovers and Mergers
The Trafford Centre The Trafford Centre, including Barton Square
The Trafford Centre Group The Trafford Centre Group Limited and its
subsidiaries to be acquired pursuant to the
Acquisition
The Trafford Centre Group The Trafford Centre Group Limited, a company
Limited incorporated in the Isle of Man (registered
no. 004199V)
UBS Limited or UBS Investment UBS Limited of 1 Finsbury Avenue, London
Bank EC2M 2PP
UK Admission the admission of the Consideration Shares
and/or the Placing Shares, as the context
requires, to the Official List becoming
effective in accordance with the Listing
Rules and the admission of the Consideration
Shares and/or the Placing Shares, as the
context requires, to trading on the London
Stock Exchange`s main market for listed
securities, becoming effective in accordance
with the Admission and Disclosure Standards
UK Listing Authority or UKLA the FSA in its capacity as the competent
authority for the purposes of Part VI of
FSMA and in the exercise of its functions in
respect of the admission to the Official
List otherwise than in accordance with Part
VI of FSMA
UK Register the register of members of the Company in
the United Kingdom
uncertificated or in recorded on the relevant register of the
uncertificated form share or security concerned as being held in
uncertificated form in CREST and title to
which, by virtue of the CREST Regulations,
may be transferred by means of CREST
United Kingdom or UK the United Kingdom of Great Britain and
Northern Ireland
United States or US the United States of America, its
territories and possessions, any state of
the United States and the District of
Columbia
US Exchange Act the United States Securities Exchange Act of
1934
US Securities Act the United States Securities Act of 1933
US Securities and Exchange the United States government agency having
Commission primary responsibility for enforcing the
federal securities laws and regulating the
securities industry/stock market
Valuation Reports the valuation reports produced by the
Valuers
Valuers DTZ, CBRE, Cushman & Wakefield and Knight
Frank
Wider Peel Group the Seller Group, the Peel Group, the
Billown Trust, any other undertaking
controlled by the Billown Trust, any
beneficiary of the Billown Trust and any
person acting in concert with any such
persons
NOTES TO EDITORS:
CSC is the leading specialist UK regional shopping centre REIT
CSC is the leading specialist developer, owner and manager of pre-eminent UK
regional shopping centres. CSC owns thirteen regional shopping centres amounting
to 14.1 million sq. ft. of retail space and externally valued at
GBP5.0 billion at 1 November 2010. The assets comprise four major out-of-town
centres - Lakeside, Thurrock; Metrocentre, Gateshead; Braehead, Glasgow and
The Mall at Cribbs Causeway, Bristol - and nine in-town centres including the
prime destinations in Cardiff, Manchester, Newcastle, Norwich and Nottingham.
With a dedicated and skilled management team, CSC aims to be the landlord of
choice for retailers, to provide compelling destinations for shoppers and to
offer clarity and transparency to investors. CSC is a responsible and
environmentally conscious participant in the communities where it invests. CSC
focuses on the creation of long term and sustainable growth in net rental income
with a view to generating superior returns to Shareholders through dividend
growth and capital appreciation.
CSC`s centres attracted 275 million customer visits and generated net rental
income of GBP267 million in 2009.
CSC was formerly known as Liberty International PLC. Its name was changed in May
2010 upon demerger of its central London activities into a newly listed company,
Capital & Counties Properties PLC.
Sponsor:
Merrill Lynch SA (Pty) Limited
Date: 25/11/2010 09:02:55 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
