By Andries Mahlangu

UK-based Capital Shopping Centres Group plc said on Thursday that the proposed acquisition of The Trafford Centre Group will deliver improved total returns for its shareholders.

The UK-and JSE-listed retail property focused group said the deal conforms with its strategy of focusing on the UK's largest and most successful shopping centre destinations, reflecting the continuing trend for trade to concentrate into fewer retail locations.

Capital on Thursday announced the details of an agreement with Tokenhouse Holdings, one of the holding companies of the Peel Group, under which it aims to acquire 100% of The Trafford Centre Group.

The terms of the deal are such that Peel will provide £77 million in cash in exchange for 167.3 million new ordinary shares in Capital and convertible bonds.

The deal will also be funded through the placing of 62.3 million new ordinary shares with institutional and certain other investors.

The placing represents 9.9% of Capital's issued capital. Merrill Lynch International and UBS Ltd have been appointed to oversee the placing process.

Capital CEO David Fischel said in a statement that the acquisition involves an equity purchase price of £747.6 million for The Trafford Centre and a further £77 million in respect of a cash contribution by Peel.

"On the basis of CSC's [Capital Shopping Centre] 30 June 2010 net asset value per share of 368 pence, the acquisition implies a price for TheTrafford Centre of approximately £1.60 billion, taking into account The Trafford Centre Group's net debt of £798 million, which mostly comprises long-dated amortising CMBS [Commercial mortgage-backed securities] notes,

and other net liabilities of £54 million at 30 June 2010.

"This represents a 3-% discount to the 1 November 2010 external valuation of £1.65 billion," Fischel said. The deal is still subject to Capital shareholders' approval.

The company has scheduled an extra ordinary meeting on 20 December 2010 to deliberate on the matter.

Fischel added that the transaction would significantly increase the group's presence in the key North West regional market, alongside Manchester Arndale while at the time strengthen retailer relationships.

Commenting on the issuing of new ordinary shares to investors, Fischel said this will strengthen the group's overall financial position by reducing the loan to value ratio from 53% to approximately 47%.

The company will also increase the flexibility to invest further in its existing key assets.

In terms of group's structure, Peel holding in Capital will be 19.9%, rising to 24.9 assuming conversion of the convertible bonds. Peel chairman John Whittaker as a result join as non- executive Director and Deputy Chairman.

Source: I-Net Bridge