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LONDON-Deutsche Bank has cut its assessment of Liberty International to “sell” from “hold” and lowered its target price to 500 pence a share from 550p following the company’s issue of new shares.

The move is in response to the issue by Liberty earlier this week of 28.4 million new shares raising £159 million ($251 million) in the process. But Deutsche analysts said in a research note: “We are perplexed by the share issue as there seemed to be little need for the company to seek additional shareholder equity.”

The report said that it appeared the company issued the shares in an attempt to enter London’s elite FTSE 100 index. But the resulting 2.4% stock dilution meant Liberty shares were expensive at 24 times 2002 earnings.

Donald Gordon, chairman of Liberty, had confirmed earlier in the week that membership of the FTSE 100 was an objective behind the share issue. Although the main purpose of the new equity, he added, was to finance an ambitious redevelopment and expansion of the portfolio.

The company intends to use the funds to pay for its increased ownership of the Victoria Centre, Nottingham. Liberty is paying £204 million ($322 million) for the purchase of interests in the centre it does not already own.

Liberty has also unveiled plans for an £85 million ($134 million) expansion at its MetroCenter development in Gateshead, a £275 million ($434 million) expansion at a scheme in Chapelfield in Norwich, and further developments at its scheme in Braehead, Glasgow.

Gordon is widely credited with introducing modern shopping malls to Britain. He was the creator of Lakeside Centre in Essex and Gateshead’s Metro Centre. He has also built Liberty International into the largest property group on the stock exchange. Earlier this week the company had a market capitalisation of £1.6 billion ($2.5 billion) within touching distance of the FTSE 100.

But analysts remain unimpressed with the company’s FTSE 100 ambitions. They argue that there is little room for growth in the portfolio and it is becoming close to impossible to gain planning permission for new large shopping centres.

But Liberty’s two brokers, Merrill Lynch and UBS Warburg, had declined to participate in underwriting the initial £90 million ($142 million) offering. The share placing was managed by Morgan Stanley International, which underwrote half the initial placing of 16m shares.

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