| Fri 7 Jan 2011, 9:06 | | CSO - Capital Shopping Centres Group Plc - Announcement of revised Trafford |
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CSO
CSO
CSO - Capital Shopping Centres Group Plc - Announcement of revised Trafford
Centre Acquisition and Publication of CSC Circular
CAPITAL SHOPPING CENTRES GROUP PLC
(Registration number UK3685527)I
ISIN Code: GB0006834344
JSE Code: CSO
CAPITAL SHOPPING CENTRES GROUP PLC
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO, OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION
Announcement of Revised Trafford Centre Acquisition and Publication of CSC
Circular
The Board of Capital Shopping Centres Group PLC (the "Company" or "CSC") is
today announcing the terms of a revised Trafford Centre acquisition (the
"Revised Acquisition") and is publishing a circular to shareholders (the
"Circular") setting out its view of the strong prospects for an independent CSC,
why it believes the indicative proposal from Simon Property Group, Inc.
("Simon") received on 15 December 2010 (the "Indicative Proposal") very
substantially undervalues the Company and its prospects, and why shareholders
should vote in favour of the Revised Acquisition.
The Board of CSC has identified significant incremental value opportunities
which imply a total potential net asset value of 536 pence per CSC share
following the Revised Acquisition. In addition, DTZ has independently identified
a further potential 89 pence per share of value that they believe would be
appropriate for a purchaser of the portfolio as a whole to pay, given the unique
and strategic nature of CSC`s shopping centres. This corresponds to a potential
net asset value of up to 625 pence per CSC share.
Revised Trafford Centre acquisition
The key terms of the Revised Acquisition are:
The CSC shares being issued in respect of The Trafford Centre are being issued
based on a higher price of 400 pence per share rather than the 368 pence per
share originally agreed;
As a result, the number of shares Peel will receive has reduced from 224.1
million shares to 205.9 million shares, on a fully diluted basis, a reduction of
18.2 million shares;
Peel`s resultant holding in CSC will reduce to 23.2 per cent. of CSC`s enlarged
issued share capital on a fully diluted basis (previously 24.7 per cent.), with
Peel`s initial ordinary shareholding remaining at 19.8 per cent.; and
The transaction is accretive to CSC`s NAV per share.
Strong CSC growth prospects
CSC is poised for net rental income ("NRI") recovery which is the key driver of
growth in earnings and dividends.
The Company has substantial reversionary potential with the current independent
valuers` estimated rental value ("ERV") of GBP355 million compared to a passing
rent and other income of GBP289 million.
In addition, CSC has potential to increase rental levels beyond the ERV from the
following:
The very limited amount of potential supply in the next few years of prime
regional shopping centre space due to planning and economic factors;
The rising demand for CSC`s large flagship stores and catering space, as
realised through new lettings achieved in 2010;
The structural shift in shopping patterns towards large centres with a strong
catering and leisure offer;
The growth prospects for new space such as St David`s, Cardiff and Eldon Square,
Newcastle which were opened during the recent economic downturn; and
The contribution of expertise and complementary skills from Peel to further
enhance CSC`s prospects, combining best practices across CSC and The Trafford
Centre and the management of shopping centres as destinations in their own
right.
Like-for-like net rental income grew consistently until 2007 with an annualised
compound growth rate of 5.5 per cent. per annum between 2000 and 2007. The
resilience of CSC`s rental income was demonstrated by the performance in the
difficult retail environment of 2008 and 2009 which saw like-for-like NRI falls
of only 4.3 per cent. in 2008 and 3.4 per cent. in 2009, recovering to a fall of
only 0.4 per cent. in H1 2010, with the market now projecting positive growth.
Occupancy has now been restored to around 99 per cent.
Simon`s proposal very substantially undervalues CSC
CSC`s potential net asset value of up to 625 pence per CSC share following the
Revised Acquisition is calculated as follows:
Updated pro forma NAV per share (excluding retained profits since 30 June 2010)
of 390 pence per CSC share(1), reflecting both an uplift in property valuations
of 1.9 per cent. or GBP89 million on existing assets since the pro forma NAV of
375 pence per CSC share as set out in the combined circular and prospectus
published by CSC on 26 November 2010, and the Revised Acquisition terms;
Adding back Stamp Duty Land Tax (SDLT) of 4 per cent., which has been deducted
within CSC`s stated property valuations and would not be payable by an acquirer
of the Company as a whole - this corresponds to a further GBP256 million or 29
pence per CSC share and an aggregate value of 419 pence per CSC share;
The property sector is barely a year past the largest decline in commercial
property values that the UK has seen in decades - even if CSC`s portfolio were
to revalue to no better than the mid-cycle average observed since 2000, with no
allowance being made for inflation, this would offer value upside of GBP775
million or 87 pence per CSC share;
CSC has identified significant and tangible active asset management and
development opportunities amounting to GBP279 million, or 30 pence per CSC
share, of undiscounted value creation; and
Taking into account the scale and quality of CSC`s portfolio, and in the context
of a highly regulated planning environment with a limited existing pipeline in
the UK, DTZ considers that CSC`s assets would warrant a premium of 12.5 to 16.0
per cent.(2) over the total of the individual property valuations if disposed as
a portfolio on the open market today. Applying a 12.5 per cent. premium would
increase the value of CSC`s portfolio by GBP801 million or 89 pence per CSC
share.
30 June 2010 NAV per share, pro forma for the Revised Acquisition, the Placing,
updated CSC valuations to 31 December 2010 and additional advisory fees incurred
since the Acquisition was announced
Including The Trafford Centre, DTZ estimates the premium to be between 12.5 to
16.0 per cent.; without The Trafford Centre the premium is estimated to be
between 11.0 to 14.5 per cent.
Recommendation
The Board believes that CSC, having come through an economic period which has
proved difficult for the entire UK property sector, is now strongly positioned
for income and value growth which will be to the benefit of all shareholders.
The Board, which has been so advised by Merrill Lynch International ("Merrill
Lynch") and UBS Limited ("UBS"), considers that, as outlined above, the
Indicative Proposal very substantially undervalues CSC and its prospects and
recommends that shareholders vote in favour of the Trafford Centre acquisition,
now on revised terms, at the forthcoming adjourned EGM scheduled for 26 January
2011 (the "Adjourned EGM"). In providing advice to the Board, Merrill Lynch and
UBS have taken into account the Board`s commercial assessments.
Further details relating to the Revised Acquisition and the full text of the
Chairman`s letter incorporated in the Circular are attached as appendices to
this announcement.
Shareholders will be sent further information and instructions in due course
regarding the Adjourned EGM.
Contacts:
Capital Shopping Centres Group PLC: +44 (0)20 7887 4220
David Fischel Chief Executive
Matthew Roberts Finance Director
Kate Bowyer Investor Relations
Hudson Sandler (UK Public Relations) +44 (0)20 7796 4133
Michael Sandler
Wendy Baker
College Hill Associates (SA Public Relations) +27 (0)11 447 3030
Nicholas Williams
BofA Merrill Lynch +44 (0)20 7628 1000
Simon Mackenzie-Smith
Simon Fraser
Noah Bulkin
UBS Investment Bank +44 (0)20 7567 8000
Hew Glyn Davies
Jonathan Bewes
Liam Beere
Merrill Lynch International, which is authorised and regulated in the United
Kingdom by the FSA, is acting exclusively for CSC and no one else in relation to
the matters referred to in this announcement 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 contents of this announcement.
UBS Limited is acting exclusively for CSC and no one else in relation to the
matters referred to in this announcement 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 contents of this announcement.
This announcement does not constitute a prospectus or prospectus equivalent
document.
This announcement has been prepared for the purposes of complying with English
law and the City Code on Takeovers and Mergers (the "Code") and the information
disclosed may not be the same as that which would have been disclosed if this
announcement had been prepared in accordance with the laws of jurisdictions
outside the United Kingdom.
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.
The release, publication or distribution of this announcement in certain
jurisdictions may be restricted by law. Persons who are not resident in the
United Kingdom or who are subject to other jurisdictions should inform
themselves of, and observe, any applicable requirements.
This announcement contains statements about the Company that are or may be
forward looking statements. All statements other than statements of historical
facts included in this announcement may be forward looking statements. Without
limitation, any statements preceded or followed by or that include the words
"targets", "plans", "believes", "expects", "aims", "intends", "will", "may",
"anticipates", "estimates", "projects" or words or terms of similar substance or
the negative thereof, are forward looking statements. Forward looking statements
include statements relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects; (ii) business
and management strategies and the expansion and growth of the Company`s
operations; and (iii) the effects of government regulation on the Company`s
business. Such forward looking statements involve risks and uncertainties that
could significantly affect expected results and are based on certain key
assumptions. Many factors could cause actual results to differ materially from
those projected or implied in any forward looking statements. Due to such
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward looking statements, which speak only as to the date hereof. The
Company disclaims any obligation to update any forward looking or other
statements contained herein, except as required by applicable law.
Dealing Disclosure Requirements
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 10th business day following the
commencement of the offer period and, if appropriate, by no later than 3.30 p.m.
(London time) on the 10th 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.
General
A copy of this announcement will be made available, free of charge, at
www.capital-shopping-centres.co.uk/investors/shareholder_info, later today. You
may request a hard copy of this announcement, free of charge, by contacting
Capita Registrars Limited at 34 Beckenham Road, Beckenham, Kent BR3 4TU. You may
also request that all future documents, announcements and information to be sent
to you in relation to the Proposal should be in hard copy form.
Capitalised terms used in this announcement but not defined herein shall have
the meaning attributed to them in the announcement released by the Company at
7:00 a.m. on 25 November 2010 in connection with the Trafford Centre
acquisition.
APPENDIX 1
CHAIRMAN`S LETTER (EXTRACTED FROM THE CIRCULAR)
"Dear Shareholder
I am writing to set out details of the revised terms of the Trafford Centre
acquisition (the "Revised Acquisition"), as well as the Board`s view of the
strong prospects for CSC and why the Board believes the indicative proposal (the
"Indicative Proposal") from Simon Property Group, Inc. ("Simon") very
substantially undervalues the Company and its prospects.
The key terms of the Revised Acquisition are:
The CSC shares being issued in respect of The Trafford Centre are being issued
based on a higher price of 400 pence per share rather than the 368 pence per
share originally agreed;
As a result, the number of shares Peel will receive has reduced from 224.1
million shares to 205.9 million shares, on a fully diluted basis, a reduction of
18.2 million shares;
Peel`s resultant holding in CSC will reduce to 23.2 per cent. of CSC`s enlarged
issued share capital on a fully diluted basis (previously 24.7 per cent.), with
Peel`s initial ordinary shareholding remaining at 19.8 per cent.; and
The transaction is accretive to CSC`s NAV per share.
On 15 December 2010, Simon made the Indicative Proposal to purchase the Company
at a price of 425 pence per share in cash (including the CSC expected final
dividend of 10 pence per share).
The Board unanimously rejected the Indicative Proposal, which it regarded as
inadequate for a number of reasons. These are set out in this document. The
Board believes that Simon continues to seek to frustrate the acquisition of The
Trafford Centre and that the Indicative Proposal is highly opportunistic, very
substantially undervaluing the Company and its prospects (as explained below).
The Board recommends that shareholders vote in favour of the Revised Acquisition
at the EGM scheduled for 26 January 2011 (the "Adjourned EGM").
Further terms of the Revised Acquisition
The Revised Acquisition will involve the issue of 167.3 million ordinary shares,
as before, and Convertible Bonds with an aggregate nominal amount of GBP154.3
million (reduced from GBP209.0 million). The initial conversion price of the
Convertible Bonds has increased from 368 pence per share to 400 pence per share,
resulting in a reduction in the number of ordinary shares underlying the
Convertible Bonds from 56.8 million to 38.6 million. The Convertible Bonds will
bear interest at the rate of 3.750 per cent. per annum (previously 4.076 per
cent. per annum). As part of these revised terms, Peel`s cash subscription
reduces from GBP74.4 million to GBP67.4 million.
The revised terms represent an implied discount of 4.5 per cent. to The Trafford
Centre independent external valuation of GBP1.65 billion at 1 November 2010 on
the basis of CSC`s updated NAV per share excluding the Revised Acquisition
(previously a 3 per cent. discount on the basis of CSC`s 30 June 2010 NAV per
share).
It has also been agreed that the Wider Peel Group will be restricted under the
Relationship Agreement from holding more than 24.9 per cent. of CSC`s issued
share capital on a fully diluted basis for the second and third year after
completion (previously 29.9 per cent.). The 24.9 per cent. limit for the first
year is unchanged.
CSC has agreed to pay a fee to Peel of GBP7.5 million in the event that
Shareholders do not approve the Revised Acquisition and a further fee of GBP9.0
million if any offer by Simon completes (or any other offer, which is announced
before the completion or lapse of any offer by Simon, completes). The total
amount of GBP16.5 million is equivalent to 1 per cent. of the value of The
Trafford Centre.
Further details of the Revised Acquisition terms are set out in Appendix (4).
Strong CSC growth prospects
CSC is poised for net rental income ("NRI") recovery which is the key driver of
growth in earnings and dividends.
As set out on page 9, the independent valuers` current estimated rental value
("ERV") is GBP355m, compared with a passing rent and other income of GBP289m,
indicating substantial reversionary potential in CSC.
In addition, CSC has potential to increase rental levels beyond the ERV from the
following:
the very limited amount of potential supply in the next few years of prime
regional shopping centre space due to planning and economic factors;
the rising demand for CSC`s large flagship stores and catering space, as
realised through new lettings achieved in 2010;
the structural shift in shopping patterns towards large centres with a strong
catering and leisure offer;
the growth prospects for new space such as St David`s, Cardiff and Eldon Square,
Newcastle which were opened during the recent economic downturn; and
the contribution of expertise and complementary skills from Peel to further
enhance CSC`s prospects, combining best practices across CSC and The Trafford
Centre and the management of shopping centres as destinations in their own
right.
Like-for-like net rental income grew consistently until 2007 with an annualised
compound growth rate of 5.5 per cent. per annum between 2000 and 2007. The
resilience of CSC`s rental income was demonstrated by the performance in the
difficult retail environment of 2008 and 2009 which saw like-for-like NRI falls
of only 4.3 per cent. in 2008 and 3.4 per cent. in 2009, recovering to a fall of
only 0.4 per cent. in H1 2010, with the market now projecting positive growth.
Occupancy has now been restored to around 99 per cent.
CSC is in a strong financial position, with LTV of 47 per cent.(1), headroom in
terms of cash and committed facilities of GBP392 million post-Placing, and no
major asset-specific debt refinancing requirements until 2015.
30 June 2010 LTV adjusted for the Placing and adjusted CSC valuations to 31
December 2010
The property sector is barely a year past the largest decline in commercial
property values that the UK has seen in decades
By making an approach at this point in the cycle, Simon is being entirely
opportunistic. Between 2006 and 2009 capital values in the IPD UK annual
shopping centres capital value index declined by 40 per cent., or, to put this
in context, capital values in the index are currently at the same level as in
2002. Even if CSC`s portfolio were to revalue to no better than the mid-cycle
average observed since 2000, with no allowance being made for inflation, this
would offer upside of 87 pence to our updated value per share of 419 pence,
adjusted for SDLT costs as referred to on page 11.(2)
30 June 2010 NAV per share, pro forma for the Revised Acquisition, the Placing
and updated CSC valuations to 31 December 2010 and additional advisory fees
incurred since the Acquisition was announced
CSC has significant value creation potential from identified development and
active management opportunities
There is significant untapped potential for further value creation in CSC`s
portfolio through redevelopment and other asset management opportunities. As an
example of this, 1.4 million sq. ft. of extension opportunities have already
been identified across three existing centres at Lakeside, Nottingham and
Braehead, equivalent to opening a major new regional shopping centre. We
estimate that there is 19 pence per share or GBP170-GBP175 million of value
creation potential across these centres, once planning consent has been
obtained. In addition, the Company has further value creation potential
estimated to be equivalent to 11 pence per share from ongoing asset management
initiatives including at The Trafford Centre.
CSC owns an unrivalled and irreplaceable portfolio of assets
It is inconceivable that a third party could organically create a portfolio of
equivalent quality and scale to that owned by CSC. The planning regime in the UK
ensures that the delivery of new shopping centre schemes is tightly controlled
and, indeed, there is only one large centre, greater than 500,000 sq. ft,
currently under construction in the entire United Kingdom with no foreseeable
prospect of planning changes to alter this position. Furthermore, no controlling
stakes in the top 10 UK shopping centres have been sold in the last 10 years.
UK comparison shopping is increasingly consolidating into prime centres in what
the Board believes is a structural shift, which enhances the strategic
importance of such assets, and is likely to benefit CSC`s portfolio.
Taking these factors into account, DTZ considers that CSC`s assets, including
The Trafford Centre, would warrant a premium of 12.5 per cent. to 16.0 per cent.
over the total of the individual property valuations if disposed as a portfolio
on the open market today. Applying a 12.5 per cent. premium would increase the
updated pro forma NAV per share by 89 pence. Without The Trafford Centre, the
premium is estimated by DTZ to be between 11.0 per cent. and 14.5 per cent.
In addition, as required under valuation guidelines, the independent valuers`
market value of each individual property is stated (in CSC`s financial
statements) after deducting purchaser`s costs including Stamp Duty Land Tax
(SDLT) at 4 per cent. The reversal of the SDLT deduction would add a further 29
pence of value per share to CSC. Simon would not pay SDLT on its proposed
acquisition of the shares of CSC as a whole, as opposed to buying the properties
individually, saving a significant transaction cost already deducted from the
property valuations.
The Indicative Proposal entirely ignores the value added by The Trafford Centre
acquisition
In May 2010, Liberty International demerged its non-shopping centre activities
and renamed itself Capital Shopping Centres Group PLC, to enable CSC to pursue a
clear strategy as the leading owner, manager and developer of pre-eminent UK
regional shopping centres, enhancing their attractiveness as destinations. The
Revised Acquisition is absolutely in line with this stated intention. It is a
very rare opportunity to acquire 100 per cent. of a pre-eminent UK out-of-town
regional shopping centre and is expected to:
strengthen CSC`s position as the leading operator of pre-eminent UK regional
shopping centres and enhance the overall quality of the portfolio. After
completing the Revised 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;
increase significantly CSC`s presence in the key North West regional retail
market, alongside Manchester Arndale;
provide an opportunity to combine management and best practices across CSC and
The Trafford Centre including, for example, adding features from The Trafford
Centre`s successful leisure and catering offering to CSC`s portfolio;
enhance further the attractiveness of CSC`s portfolio to retailers;
provide significant asset management opportunities to grow ERV at The Trafford
Centre with an estimated GBP50 million of investment opportunities already
identified; and
enhance further the overall financial position of CSC with the addition of The
Trafford Centre`s high-quality income stream and long-dated CMBS debt, which
will extend CSC`s average debt maturity.
Peel`s confidence in the future value creation strategy of CSC is clearly
demonstrated since Peel will not receive cash as consideration and is in fact
investing further capital in the Company as part of the Revised Acquisition.
Peel`s objective is to be a long-term supportive shareholder in CSC. John
Whittaker will become Deputy Chairman and a non-executive Director of the
Company, contributing considerable expertise to the Board.
Recommendation
The Board believes that CSC, having come through an economic period which has
proved difficult for the entire UK property sector, is now strongly positioned
for income and value growth which will be to the benefit of all shareholders.
The Board, which has been so advised by Merrill Lynch International ("Merrill
Lynch") and UBS Limited ("UBS"), considers that, as outlined above, the
Indicative Proposal very substantially undervalues CSC and its prospects and
recommends that shareholders vote in favour of The Trafford Centre acquisition,
now on revised terms, at the forthcoming Adjourned EGM. In providing advice to
the Board, Merrill Lynch and UBS have taken into account the Board`s commercial
assessments.
Shareholders will be sent further information and instructions in due course
regarding the Adjourned EGM.
Yours sincerely,
Patrick Burgess
Chairman"
APPENDIX 2
VALUATIONS AT 31 DECEMBER 2010
The valuation reports of the Group`s properties have been prepared in accordance
with Rule 29 of the City Code on Takeovers and Mergers and RICS Valuation
Standards.
1. Valuation reports as at 31 December 2010
As at 1 November 2010, the market value of the Group`s investment and
development properties was GBP5.0 billion. As at 31 December 2010, the Group`s
investment and development properties were valued at GBP5.1 billion,
representing an increase of GBP0.1 billion since 1 November 2010.
2. Table of investment and development properties
31 December 2010 1 November 2010
Ownersh Market Initial Nominal Market Initia Nominal
ip % value yield % equivalen value l equivale
(GBPm) t yield % (GBPm) yield nt yield
% %
Lakeside, 100 1,053 5.19 5.75 1,025 5.32 5.90
Thurrock
Metrocentre, 90 843 5.70 6.33 810 5.96 6.65
Gateshead
Braehead, 100 575 5.20 6.12 569 5.27 6.22
Glasgow
The Harlequin, 93 353 5.15 6.65 352 5.06 6.65
Watford
Victoria 100 337 5.33 6.40 326 5.44 6.60
Centre,
Nottingham
The Arndale, 48 336 5.76 5.99 328 5.84 6.13
Manchester(1)
Eldon Square, 60 250 4.62 7.01 244 4.42 7.16
Newcastle upon
Tyne
St David`s, 50 243 3.47 6.09 237 3.24 6.40
Cardiff
Chapelfield, 100 236 5.22 6.80 233 5.15 6.90
Norwich
Cribbs 33 221 5.49 6.05 220 5.43 6.12
Causeway,
Bristol(1)
The Chimes, 100 217 6.01 6.50 214 6.09 6.60
Uxbridge
The Potteries, 100 201 6.43 7.25 201 6.49 7.25
Stoke-on-Trent
The Glades, 64 178 5.61 7.25 177 5.68 7.25
Bromley
Other 48 49
Total 5,092 5.32 6.30 4,985 5.39 6.46
(1) The Arndale, Manchester is held through a JV which has a 95 per cent.
interest in the Arndale and 90 per cent. interest in New Cathedral Street.
Cribbs Causeway is held through a JV which has a 66 per cent. interest in The
Mall at Cribbs Causeway and a 100 per cent. interest in the Retail Park, Cribbs
Causeway
The valuation reports are contained in the Circular which will be posted to the
Company`s shareholders. A copy of the valuation reports and the consent letters
from the independent valuers will be made available on the Company`s website at
www.capital-shopping-centres.co.uk/investors/shareholder_info. They may also be
inspected during usual business hours on any Business Day at the registered
office of the Company, at the offices of Linklaters LLP, One Silk Street, London
EC2Y 8HQ, United Kingdom, and at the offices of Merrill Lynch 251 South Africa
(Pty) Ltd, 138 West Street, Sandown, Sandton 2196, South Africa and will also be
available for inspection at the CSC Adjourned EGM on 26 January 2011 for at
least 15 minutes prior to and during the meeting.
APPENDIX 3
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 Revised 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.
Pro Forma Statement of Net Assets
Adjustments
CSC 30 Placing Trafford Other Pro forma
June 2010 (2) Centre adjustme
(1) Group nts (4)
31 March
2010 (3)
Assets
Investment, 4,915.5 - 1,678.4 124.4 6,718.3
development and
trading properties
Goodwill - - - 10.8 10.8
Cash and cash 127.7 216.2 44.2 48.4 436.5
equivalents
Investments 48.0 - - (5.0) 43.0
Derivative 23.0 - 0.2 - 23.2
financial
instruments
Trade and other 111.0 - 19.0 12.8 142.8
receivables
C&C US - assets 429.6 - - - 429.6
Other assets 8.2 - 0.4 - 8.6
Total assets 5,663.0 216.2 1,742.2 191.4 7,812.8
Liabilities
Borrowings (2,884.5) - (847.5) 5.0 (3,727.0)
Trade and other (216.0) - (77.4) (33.0) (326.4)
payables
Derivative (413.5) - (24.3) - (437.8)
financial
instruments
C&C US - (285.6) - - - (285.6)
liabilities
Deferred tax - - (343.8) 343.8 -
Other liabilities (1.4) - - - (1.4)
Total liabilities (3,801.0) - (1,293.0) 315.8 (4,778.2)
Net assets 1,862.0 216.2 449.2 507.2 3,034.6
Net assets 2,309.1 3,489.4
(diluted,
adjusted) (5)
Net external debt 2,622.4 3,156.1
(6)
Loan to value (7) 53% 47%
Diluted number of 626.7 894.9
shares (million)
(8)
Net assets per 368p 390p
share (diluted,
adjusted) (9)
Notes:
(1) The financial information of the Group has been extracted without material
adjustment from the unaudited interim report of the Group for the half year
ended 30 June 2010.
(2) The proceeds of the placing completed on 25 November 2010 in which the Group
issued 62.3 million new ordinary shares at 355 pence per share, net of costs of
GBP5 million.
(3) The financial information of The Trafford Centre Group has been extracted
without material adjustment from the historical financial information in Part A
of Part VIII of the Original Prospectus (``Historical Financial Information of
The Trafford Centre Group``).
(4) Adjustments to reflect the Revised 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) The Original Prospectus included investment and development property
valuations that had been updated to 1 November 2010, which resulted 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.
The Group investment and development property valuations have been updated to 31
December 2010 resulting in a further adjustment of GBP102.5 million. This
increase combined with the GBP21.9 million adjustment for the period to 1
November 2010 results in a total adjustment of GBP124.4 million in respect of
the Enlarged Group investment and development property.
The 1 November 2010 valuations were included in Part X and Part XI of the
Original Prospectus. The 31 December 2010 valuations of the Group`s properties
are included in Appendix 3 ("Valuation reports as at 31 December 2010") of the
Circular.
(c) On acquisition, as part of the 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 Revised Acquisition the shareholders of The Trafford Centre
Group will subscribe GBP67.4 million for Consideration Shares and Convertible
Bonds which is reflected as an increase in cash.
(e) Acquisition and advisory costs of GBP19.0 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 GBP127.6 million
Convertible Bonds. The fair value of the shares issued as consideration will be
calculated for acquisition accounting purposes based on the share price at the
date the acquisition completes. An estimation of the fair value of the shares
issued as consideration has been made using 400 pence per share based on the
Revised Acquisition terms as detailed in Appendix 1. 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 620.0
Perpetual convertible bond 127.6
747.6
Adjusted net assets:
At 31 March 2010 449.2
Pre-acquisition adjustment (4a) 12.8
Investment and development property (36.0)
adjustment (4b)
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
CSC 30 Placing Trafford Other Pro
June 2010 Centre Group adjustmen forma
31 March ts
2010
Borrowings 2,884.5 - 847.5 (5.0) 3,727.0
Metrocentre (134.4) - - - (134.4)
compound
financial
instrument
Gross 2,750.1 - 847.5 (5.0) 3,592.6
external debt
Cash and cash (127.7) (216.2) (44.2) (48.4) (436.5)
equivalents
Net external 2,622.4 (216.2) 803.3 (53.4) 3,156.1
debt
(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. The
pro forma loan to value ratio has been updated for the 31 December 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 the
Group since 30 June 2010, nor of The Trafford Centre Group since 31 March 2010,
other than the updated investment and development property valuations of the
Group as at 31 December 2010 and The Trafford Centre as at 1 November 2010.
(11) The pro forma statement of net assets presented in the Original Prospectus
has been updated to reflect:
(a) the Revised Acquisition terms which have resulted in the nominal value of
the Convertible Bonds being issued reducing from GBP177.2 million to GBP127.6
million and the cash from the subscription from Consideration Shares and
Convertible Bonds reducing by GBP7.0 million.
(b) investment and development property valuations as at 31 December 2010 for
the Group and updated estimated acquisition and advisory costs. Group
investment and development property has increased by GBP102.5 million since the
1 November valuations while estimated acquisition and advisory costs have
increased by GBP14.0 million.
APPENDIX 4
THE REVISED ACQUISITION TERMS
CSC and Peel have entered into an amendment agreement relating to the
acquisition of The Trafford Centre Group (the "Amendment Agreement"). The key
terms of the Revised Acquisition as amended by the Amendment Agreement are set
out below.
Consideration
CSC will acquire The Trafford Centre Group in exchange for a total of 167.3
million Consideration Shares of 50 pence each and convertible bonds with an
aggregate nominal amount of GBP154.3 million (previously GBP209.0 million) and
also receive GBP67.4 million (previously GBP74.4 million) in cash. The number of
Ordinary Shares and the aggregate nominal amount of Convertible Bonds to be
issued has been determined such that in effect:
155.0 million Consideration Shares are being issued at a price per share of 400
pence (previously 368 pence), for a total of GBP620.0 million (previously
GBP570.4 million) and GBP127.6 million (previously GBP177.2 million) Convertible
Bonds are being issued at par in respect of the acquisition of The Trafford
Centre itself, at an unchanged equity purchase price of GBP747.6 million; and
12.3 million Consideration Shares are being issued, as before, at the Placing
Price, being 355 pence per share and GBP26.7 million (previously GBP31.8
million) Convertible Bonds are being issued, for GBP67.4 million (previously
GBP74.4 million) in cash.
The Revised Acquisition will result in Peel holding 169.7 million Ordinary
Shares (including Ordinary Shares owned prior to the Acquisition) and GBP154.3
million in aggregate nominal amount of Convertible Bonds, representing 19.8 per
cent. of the Enlarged Issued Share Capital of CSC (unchanged from previously)
and 23.2 per cent. (previously 24.7 per cent.) assuming conversion of the
Convertible Bonds.
Terms of Convertible Bonds
The GBP154.3 million Convertible Bonds will be perpetual subordinated bonds,
convertible into Ordinary Shares of the Company at the option of the bondholder
any time after two 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 400 pence per Ordinary Share (previously 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 15.0 pence in respect of any
fiscal year. Claims of bondholders will, on a winding up of the Company, be
subordinated to claims of senior creditors of the Company, but will rank in
priority to claims of holders of all classes of the Company`s share capital. The
Convertible Bonds will bear interest at the rate of 3.75 per cent. per annum
payable semi-annually in arrear (previously 4.076 per cent. per annum). The
Company shall at its sole discretion have the right to defer payments of
interest on the Convertible Bonds. If the Company elects to defer payments of
interest on the Convertible Bonds, the Company will not be permitted under the
terms of the Convertible Bonds to pay a dividend in respect of the Ordinary
Shares until such time as all arrears of interest have been paid.
Although the Convertible Bonds do not have a fixed redemption date, the Company
may elect to redeem the Convertible Bonds at their principal amount on the third
anniversary of the issue date or on any interest payment date thereafter, and in
certain other limited circumstances.
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.
Relationship Agreement
CSC and Peel have agreed that the Wider Peel Group will be restricted under the
Relationship Agreement from holding more than 24.9 per cent. of CSC`s issued
share capital on a fully diluted basis for the second and third year after
completion (previously 29.9 per cent.). The 24.9 per cent. limit for the first
year is unchanged. These limits exclude any shares acquired pursuant to any
scrip dividend arrangement.
Conditionality
The Acquisition remains conditional upon, inter alia, the passing of the
resolution to approve the Revised Acquisition by CSC Shareholders at the CSC
Adjourned EGM, 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 is 31 January 2011.
Fee Arrangements
CSC shall pay a fee of GBP7.5 million (the "First Fee") to Peel if CSC`s
shareholders do not pass the shareholder resolution to approve the Revised
Acquisition at the CSC Adjourned EGM, or the CSC Adjourned EGM is further
adjourned until after the long-stop date in the Acquisition Agreement so that
CSC shareholder approval of the Revised Acquisition cannot be obtained before
such long-stop date.
If, and only if, the First Fee becomes payable, CSC will pay a second fee of
GBP9 million (the "Second Fee") to Peel if Simon or any person acting in concert
with it makes a firm offer (including an offer to be implemented by way of a
scheme of arrangement, and whether or not subject to pre-conditions) to purchase
more than 50 per cent of the issued share capital of CSC (other than any shares
already held by such an offeror) for the purposes of Rule 2.5 of the Code either
(i) prior to the CSC Adjourned EGM or (ii) with the consent of board of the
directors of CSC, within 6 months of an announcement being made by Simon
pursuant to Rule 2.8 of the Code, and in any such case such offer (as
subsequently amended) is declared unconditional in all respects or is otherwise
completed.
CSC will also be liable to pay the Second Fee if any other person makes a firm
offer (including an offer to be implemented by way of a scheme of arrangement,
and whether or not subject to pre-conditions) to purchase more than 50 per cent
of the issued share capital of CSC (other than any shares already held by such
an offeror) for the purposes of Rule 2.5 of the Code prior to the lapse or
completion of any offer made by Simon as referred to in the paragraph above and
such offer (as subsequently amended) is declared unconditional in all respects,
becomes effective or is otherwise completed.
CSC shall not be obliged to pay any amount which the Panel determines would not
be permitted under the Code.
A copy of the Amendment Agreement may be inspected during usual business hours
on any Business Day, up to and including the date on which admission of the
Consideration Shares occurs, at the registered office of the Company, at the
offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ, United Kingdom, and
at the offices of Merrill Lynch 251 South Africa (Pty) Ltd, 138 West Street,
Sandown, Sandton 2196, South Africa and will also be available for inspection at
the CSC Adjourned EGM on 26 January 2011 for at least 15 minutes prior to and
during the meeting.
07 January 2011
Sponsor: Merril Lynch SA (pty) Limited
Date: 07/01/2011 09:06:46 Produced by the JSE SENS Department.
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