| Mon 13 Dec 2010, 7:35 | | GEN - Simon Property Group Inc. - Letter to the board of CSC |
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JSE
GEN
GEN - Simon Property Group, Inc. - Letter to the board of CSC
Simon Property Group, Inc.
13 December 2010
SIMON PROPERTY GROUP, INC. ("SIMON")
CAPITAL SHOPPING CENTRES GROUP PLC ("CSC")
Simon announces that on 12 December 2010 it sent a letter, the text of which is
set out below, to the Board of CSC.
Simon is inviting the Board of CSC to explore an alternative financing proposal
for the acquisition of the Trafford Centre. Simon considers this proposal to be
more attractive for CSC shareholders than the transaction which the Board of CSC
has recommended that shareholders support at the EGM currently scheduled for 20
December 2010.
LETTER TO THE BOARD OF CSC:
December 12, 2010
Patrick Burgess Esq, MBE
Chairman
Capital Shopping Centres Group PLC
40 Broadway
London SW1H 0BT
Dear Patrick:
I am writing with an alternative proposal for a funding of the Trafford Centre
transaction which we believe provides a compelling solution for CSC and its
shareholders.
Simon has been a supportive shareholder of Capital Shopping Centres. Even
during our recent public exchange of views, you have been kind enough to
acknowledge that we remain a valued shareholder. It is good to know you
recognise that it is in this spirit that we have been making our views known
about the Trafford Centre transaction.
We recognise that Trafford Centre may be a strategically important asset,
although we continue to have concerns regarding the agreed purchase price. To a
greater extent, we are concerned that the funding of the transaction in shares,
on the agreed terms, results in CSC - and by extension its shareholders -
overpaying for the Trafford Centre. We have been speaking to other shareholders
in CSC, who have expressed similar concerns.
As we have said on more than one occasion, CSC is contemplating transferring
significant control to Peel, while failing to extract a premium for it, and is
issuing securities to Peel at a discount to CSC`s latest stated NAV. If you
insist upon proceeding with the Trafford Centre acquisition, the only feasible
solution to address our funding concern is to issue the securities that are
effectively financing the transaction at a higher price. This would avoid the
reduction in the company`s net asset value and the destruction of shareholder
value - indeed at the right price, shareholder value would be enhanced.
You are currently proposing to issue up to 224.1 million new ordinary shares on
a fully diluted basis, 20.9 million of which will be issued at 355p per share,
and 203.2 million shares issued at 368p per share, or a blended share price of
367p. This represents a 2.7% discount to NAV per share of 377p. As a more
attractive and less dilutive alternative, we would be prepared to subscribe,
subject to a clawback, for fully diluted issue of 205.5 million new ordinary
shares at a price of 400p per share, representing a 9.0% premium to Peel`s
blended share price of 367p per share, as well as a 6.1% premium to NAV. The
issue would comprise 153.3 million new ordinary shares, together with GBP 209
million of convertible bonds (the same amount as would be issued to Peel),
convertible into 52.2 million ordinary shares, for which we would be prepared to
accept the same coupon as Peel despite the higher conversion price of 400p.
Our proposal entails a cash placing to Simon at a price that reflects a
substantial premium to the terms of the existing Peel transaction and is much
less dilutive to existing shareholders. This placing would be subject to a
partial clawback of up to 50% in favor of other existing CSC shareholders, so
that they can share in the transaction and reduce our holdings if they wish.
Our minimum resulting shareholding, on a fully diluted basis and assuming full
clawback, would be 18.4%, inclusive of our current shareholdings. The cash
proceeds of the issue would be payable to Peel, meaning that Peel would receive
the cash equivalent of the agreed value without a discount.
You have agreed to a number of other terms with Peel to reflect their proposed
shareholding. We would be willing to accept certain terms that are less
favourable to us: no deputy chairmanship; a board seat only if our aggregate,
fully diluted shareholding at the relevant time exceeded 15%; and to be bound
not to dispose of CSC securities upon the same terms agreed upon for Peel, but
for a period of 42 months, six months longer than Peel. We would also match the
Peel standstill requirements. To be clear, this proposal is not subject to due
diligence.
Simon is a nearly $60 billion company with shopping centers in the U.S. and
Europe, Asia and Mexico, and has more retail assets under management than any
other company worldwide. We have a fifty year history of successful retail real
estate development, management and leasing and a proven track record of creating
shareholder value through multiple economic cycles. As an example, over the ten
years ending December 2009, while the S&P500 posted a total return including
dividends of negative 9%, Simon delivered a total shareholder return of 496%,
and a compounded annual gain of 19.5%. Our outperformance has continued in 2010
with a year to date total return as of 30 November 2010 of 27.1% compared to the
S&P 500 total return of 7.9%.We believe that our expertise as the world`s
largest owner and operator of shopping centers could be an invaluable asset for
the CSC Board and the company.
Given that this new proposal solves a significant concern that has been
expressed about the Trafford Centre acquisition in its current form, we firmly
believe you should recommend it to your shareholders. If CSC is to proceed with
the Trafford Centre acquisition, financing that transaction on clearly better
terms has to be in the company`s and its shareholders` best interests. We would
be more than happy to engage with you immediately on this and/or our earlier
proposal, which remains on the table.
Yours sincerely
David Simon
Chairman of the Board and
Chief Executive Officer
Notes: References to an issue of CSC shares on a fully diluted basis represent
the number of ordinary CSC shares that would be in issue following conversion of
the CSC convertible bonds at the strike price.
Enquiries
Simon
Shelly Doran (Investors)
Telephone: +1 317 685 7330
Les Morris (Media)
Telephone: +1 317 263 7711
Lazard
Telephone: +44 (0) 20 7187 2000
(Financial adviser to Simon)
Jeffrey Rosen
William Rucker
Patrick Long
Citi
Telephone: +44 (0) 20 7986 4000
(Financial adviser to Simon)
Philip Robert-Tissot
Grant Kernaghan
Charles Lytle (Corporate Broking)
Evercore
Telephone: +44 (0) 20 2268 2702
(Financial adviser to Simon)
Julian Oakley
Citigate Dewe Rogerson
Telephone: +44 (0) 20 7638 9571
(UK media adviser to Simon)
Grant Ringshaw
Patrick Donovan
Tom Baldock
Sard Verbinnen & Co
Telephone: +1 212 687 8080
(US media adviser to Simon)
Hugh Burns
Brooke Gordon
Nathaniel Garnick
Lazard & Co., Limited, Citi and Evercore, who are each authorised and regulated
in the United Kingdom by the Financial Services Authority, are each acting for
Simon and no-one else in connection with the matters referred to in this
announcement and will not be responsible to anyone other than Simon for
providing the protections afforded to clients of Lazard & Co., Limited or Citi
or Evercore respectively or for providing advice in relation to the contents of
this announcement.
Date: 13/12/2010 07:35:01 Produced by the JSE SENS Department.
