Unibail-Rodamco-Westfield, Europe's biggest property owner, hit back saying its board of directors strongly disagreed with the proposals from the Niel-led consortium.
Niel, founder of French broadband provider Iliad, and Unibail's former CEO Leon Bressler, heading a group of investors with a combined 4.1% stake, have asked shareholders to vote against the rights issue at a general meeting on November 10.
They will need over 35% of voters present at the meeting to oppose the issue to be successful. Unibail shares closed up 13.8% on Thursday.
Bressler called the rights issue "a misguided act by a management team that remains prisoner of its failed strategy that started with the acquisition of Westfield." He said the purchase of the Westfield shopping mall business was responsible for Unibail's heavy debt.
"It is time to re-establish URW as Europe's leading pure-play prime shopping centre business by selling the U.S. portfolio and using proceeds to solve the company's debt issues," Bressler said in a statement.
Unibail agreed to buy Westfield, which is mainly focused on the United States and Britain, in late 2017 for $16 billion. It has around 24 billion euros in debt.
Unibail said in the statement that these proposals "add significant uncertainty and risk in the current complex environment".
Unibail's chairman said that its initial plan, called RESET, which is aimed at improving the firm's balance sheet by selling assets, raising equity and cutting capital expenditure, was about "immediate action to ensure the operational and financial flexibility".
"It will reinforce URW in the long term to the benefit of all its shareholders," Colin Dyer was quoted as saying.
Independent analyst Amal Aboulkhouatem thought it was feasible that Niel and Bressler would muster enough support given their reputations, networks and the alternative prospect of a dilutive capital increase.
Unibail's stock, recently hit by COVID-19 lockdowns, has lost ground since the Westfield acquisition in 2017.
Bressler said the deal had "polluted" the group's dominant position in Europe with a more marginal position in the United States.
URW operates 89 shopping centres mainly in the United States and in Europe, including those at Forum des Halles in Paris and La Part-Dieu in Lyon, a portfolio that the group valued at 60.4 billion euros as of July 30.
(This story corrects to fix dropped letter in headline)
(Reporting by Sarah Morland in Gdansk and Maya Nikolaeva in Paris; editing by Jane Merriman and Elaine Hardcastle)
By Sarah Morland