December 15, 2010 6:08 PM

U.K. Mall Chain Rejects $4.6 Billion Simon Property Offer

Posted by Tom Huddleston Jr.

The board of directors of Capital Shopping Centres Group, the United Kingdom's largest mall chain, has unanimously rejected a $4.6 billion takeover bid put forward Wednesday by Indianapolis-based Simon Property Group, Inc., Capital Shopping said in a statement.

Simon Property made its bid, which was extended early Wednesday, contingent on the British company nixing a deal it reached earlier this month for the Trafford Centre--a major shopping center in the city of Manchester. On December 3, U.K. publication LegalWeek reported that Capital Shopping had agreed to pay Peel Holdings $2.5 billion for Trafford Centre. 

According to Bloomberg, Simon Property's interest in the U.K. mall owner became public around the time that Capital Shopping reached agreement with Peel. But in a letter to Capital Shopping's board released in conjunction with his company's takeover bid, Simon Property chairman David Simon called on that body to kill the Trafford Centre deal.

In his letter, Simon urged the Capital Shopping board "to listen to calls from your shareholders--many of whom we have spoken to--opposing the Trafford Centre transaction or asking you to adjourn your forthcoming [Extraordinary General Meeting]."

In fact, when that meeting convened later on Wednesday, topics on the agenda included complaints about the Simon Property proposal. Among the gripes: that Simon's offer of $6.70 per share "very substantially undervalues the company and its prospects." (The offer represented a 26 percent premium over Capital Shopping's November 24 closing price.)

In defending its decision to reject the bid, the board also cited conditions contained in the Simon Property offer related to due diligence and financing--as well as Simon Property's demand for the right to terminate interest in the deal without reason, and the Trafford Centre contingency.

The Am Law Daily has learned from a source close to the negotiations that Linklaters--which advised Capital Shopping in the Trafford Centre deal--is representing the U.K. mall owner in its talks with Simon Property.

Simon Property, meanwhile, is being advised by Freshfields Druckhaus Derringer and Wachtell, Lipton, Rosen & Katz. Freshfields corporate partners Piers Prichard Jones, Matthew Cosans, and Will Lawes led the way for that firm. Corporate partner Adam Emmerich and real estate partner Robin Panovka took the lead for the Wachtell team, with tax partner Joshua Holmes also advising. Simon Property general counsel James Barkley served as the primary in-house attorney for the company.

In February, Emmerich also served as a lead counsel for Wachtell on Simon Property's $10 billion bid for bankrupt rival General Growth Properties, which went through the largest real estate bankruptcy filing in U.S. history in 2009. In the end, General Growth favored bids from a group of investors led by Brookfield Asset Management.

Simon Property's proposal may not be completely dead. Capital Shopping also announced Wednesday that its board will postpone a December 20 meeting to approve the deal for the Trafford Centre until late January. According to Bloomberg, Simon Property "welcomes" the delay, indicating that the extended window could lead to further negotiations.

Rich Moore, an analyst at RBC Capital Markets, told Bloomberg: "I don't think we're done. My intuition and experience with Simon tells me when they're interested they don't just walk away when someone says no to the first offer."

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