CSC Rejects Simon Bid, But Postpones Mall Buy

LONDON-Locally-based Capital Shopping Group, having today turned down a $6.66 per share informal takeover bid from Indianapolis-based Simon Property Group, did make a small concession to the US-based mall REIT. The CSC board meeting to approve the $1.2 billion purchase of the local Trafford Centre Mall, which investor Simon opposes, has been postponed until January.

Simon, a 5.6% owner in CSC, said in a letter to the local firm that the price for the 1.9 million square foot mall is too great, and has threatened to sell its stock if the purchase is made. Similar to a poker-hand showdown, board chairman and CEO David Simon has sent letters both asking for the sale to stop, and, today offered the non-binding takeover bid – in an apparent attempt to see if the CSC board will back off of the Trafford sale.

The board did blink, somewhat. Though the company issued a statement rejecting the Simon offer as too low for a company that owns 13 regional shopping centers in the United Kingdom, CSC agreed to move the Trafford approval from its planned Dec. 20 extraordinary general to next month. “The date of the adjourned EGM is now expected to be in late January 2011, ahead of the long stop date under the Trafford Centre acquisition of Jan. 31. Unless Simon provides to CSC, in advance of the adjourned EGM date, a firm proposal that the board would be willing to recommend, the board expects to continue to recommend the Trafford Centre acquisition,” said CSC in a statement today. Shares of the company closed at $6.20 Tuesday.

CSC said in its statement that it rejects the recent informal deal because it is not a legally-binding offer per British law, and questions why Simon needs due diligence time. In return, David Simon said in a letter that CSC has not cooperated with requests for due diligence.

The Trafford purchase would enable CSC to own four of the top six shopping centers in the United Kingdom, said the company in a statement. “The board believes that CSC’s portfolio will generate long-term attractive returns for shareholders significantly superior to Simon’s cash proposal,” the company said in today’s statement. The company said it has been advised against the Simon deal by Merrill Lynch International and UBS Limited.

In a letter dated today, David Simon said he would rather a formal offer be made with the consent of the CSC board. “We believe that we should work together to announce a recommended offer,” he said in today’s letter,” and would urge you to listen to calls from your shareholders – many of whom we have spoken to – opposing the Trafford Centre transaction.” Simon has appointed Citi, Lazard and Evercore as financial advisors for this offer, and Watchtell Lipton as legal advisors.

For the second time this year, Simon appears to be getting a cold shoulder from a takeover offer. The REIT spent the first half of the year in a frustrating but failed takeover attempt of Chicago-based General Growth Properties.