Peel rejects Simon’s Trafford Centre offer

Peel has responded to a letter from Simon Property Group to Capital Shopping Centres Group, which proposes fundamental changes to the agreed Trafford Centre transaction between Peel and CSC.

American firm Simon Property Group owns 5.1% of CSC and is proposing a share deal which would effectively finance the transaction at a higher price.

In a statement released on Monday morning, Peel said: "Peel Group remains committed to the agreed transaction with CSC, subject to approval of CSC shareholders on 20 December 2010. Peel has no intention of selling the Trafford Centre for cash and this has never been an aim of the group – in spite of the fact that Peel has been advised a cash sale would achieve a higher price – and nor does Peel intend entering into such a discussion. Rather, Peel's stated objective is to increase and diversify its exposure to the UK shopping centre market via a long-term investment in CSC.

"The transaction will bring to CSC the value of John Whittaker's extensive experience in the retail and leisure property sectors and, through the addition of the Trafford Centre, will create an unrivalled portfolio of UK regional shopping centre assets.

"The transaction is part of Peel's ongoing strategy to broaden its investment in property and infrastructure through partnerships with complementary businesses.

"Peel believes the combination of the Trafford Centre within the CSC portfolio, together with an improved capital structure and a strong and supportive shareholder, will significantly improve the growth prospects for CSC for the next cycle and for the long term. Peel looks forward to supporting the CSC Board, for the benefit of all shareholders, to further enhance CSC's position as a leading UK shopping centre investor."

Peel reached agreement with Capital Shopping Centres to sell its prized 1.9m sq ft shopping and leisure complex for £1.65bn in exchange for a 19.9% stake in CSC in November.

The deal involves an equity purchase price of £747.6m for the Trafford Centre and a £77m cash payment by Peel, in return for shares and bonds in CSC.

Peel's chairman, John Whittaker, would become deputy chairman of the CSC board as part of the deal.

Simon Property Group is prepared to subscribe to a sale of up to £205.5m of CSC shares priced at 400p.

SPG currently owns or has an interest in 393 properties comprising 264m sq ft of gross leasable area in North America, Europe and Asia.