* Simon pitches alternative funding for CSC's UK mall buy
* Proposal may see Simon with 18.4 pct to 27 pct CSC stake
* Potential offer to buy CSC also remains on table -Simon
* CSC says Simon's offer 'completely impracticable'
* CSC says in shareholders' interest: Proceed with Peel deal
* Simon urges CSC to postpone shareholders meeting
(Recasts first sentence; adds Simon's response)
By Daryl Loo and Ilaina Jonas
LONDON/NEW YORK Dec 12 Capital Shopping
Centres CSCG.L has slammed as "incapable of implementation
and completely impracticable" an alternative funding offer
from its shareholder and would-be bidder Simon Property Group
Inc (SPG.N), who quickly responded, urging CSC to postpone a
vote on its planned acquisition of Trafford Centre mall.
Earlier on Sunday, Simon Property had pitched to CSC's
board a plan to help fund the UK firm's 1.6-billion-pound
($2.53 billion) mall acquisition, which it argues offers
better terms while potentially lifting Simon's stake in CSC to
up to 27 percent.
But CSC was quick to spurn Simon's proposal, calling it
"incapable of implementation and completely impracticable,"
just hours after receiving it.
"The CSC Board notes that what SPG proposes would provide
SPG with a holding of between approximately 18.4 percent and
26.9 percent in CSC, together with a seat on CSC's Board,"
CSC, which owns 13 regional UK malls, said in an e-mailed
"It is not open to CSC unilaterally to alter the terms of
its legally binding contract with Peel. Therefore, what Simon
Property proposes does not provide a genuine alternative for
CSC shareholders," CSC added.
Simon, which now owns 5.1 percent of CSC, objected last
week to CSC's plan to partly fund its purchase of the Trafford
Centre mall in Manchester with shares and convertible bonds
that gives seller Peel Group a 19.9 percent stake in CSC.
The war of words between Simon and CSC, respectively the
United States' and UK's largest owners of shopping centres,
had started on Nov 25 when CSC first unveiled the Trafford
deal, which is poised to make Peel its biggest shareholder.
'DISAPPOINTED,' SIMON SAYS
In an equally quick response late Sunday, Simon said it
was "deeply disappointed that CSC has failed to give our
proposal due consideration," a spokesman for the
Indianapolis-based company said in a statement.
Simon has argued CSC would be overpaying for Trafford
Centre if it goes ahead with its plan to buy the asset in a
deal that would dilute shareholders' value.
"If an alternate structure is not possible, the preferable
course for CSC shareholders would be to vote against the
transaction," Simon said. "At a minimum, CSC should adjourn
the scheduled shareholders' meeting to consider and evaluate
the constructive proposal fully."
CSC's shareholders are due to vote on the transaction at
an extraordinary general meeting on Dec 20 -- a week from
"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," David Simon, chairman of Simon Property, had said
in an earlier letter addressed to CSC's board.
CSC BACKS PEEL STAKE
In rejecting Simon Property's counter-offer, CSC said its
board noted that the U.S. property company "is now recognising
the strategic importance of the Trafford Centre as a future
part of CSC's portfolio.
"Peel has reiterated to the CSC Board ... that it wishes
to remain invested in UK regional shopping centres and does
not wish to sell the Trafford Centre for cash as Simon
Property is suggesting," CSC said.
Peel, controlled by UK billionaire John Whittaker, has
also stated it plans to remain a "long-term supportive
shareholder in CSC," the UK company said, reiterating its
recommendation that CSC shareholders vote in favor of the
In its letter, Simon Property offered to subscribe for an
issue of 205.5 million CSC shares at 400 pence each, which it
said was a 6.1 percent premium to CSC's net asset value, and 9
percent higher than CSC's current deal with Peel.
The proposal would lift Simon Property's stake in the UK
firm to at least 18.4 percent, following a "clawback" option
for other CSC shareholders. Excluding the clawback, Simon
Property could end up with a 27 percent stake in CSC, putting
it just shy of a 30 percent shareholding that would trigger an
offer under UK takeover rules.
To further sweeten its offer, Simon Property had said it
is willing to accept certain "less favourable" terms compared
to those offered to Peel, including not requesting a deputy
chairmanship on CSC's board, and to hold on to CSC's shares
for a longer period than Peel.
Simon Property, which is being advised by Lazard and Citi,
said its earlier proposal to make a potential cash offer for
CSC at a premium to NAV, made late last month in an attempt to
block the Trafford deal, also remains on the table.
(Additional reporting by Nick Zieminski; Editing by Jan
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