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Hammerson calls off Intu takeover, citing tough retail market and shareholder pressure

Hammerson had received opposition to its takeover bid for Intu from a number of shareholders

Hammerson
Intu says Hammerson’s rationale for calling off the deal is “unsatisfactory”

Hammerson PLC (LON:HMSO) has pulled its £3.5bn takeover offer for fellow shopping centre owner Intu Properties PLC (LON:INTU), blaming pressure from shareholders and a tough UK retail market.

Intu said Hammerson’s rationale for calling off the deal was “unsatisfactory” after reiterating its support for the takeover in March.

Shares in Intu fell 3.6% to 200p each in morning trading while Hammerson gained 2.3% to 505p.

The decision to ditch the takeover plan comes after French shopping centre operator Klepierre withdrew a £5bn bid for Hammerson.

Last week, Hammerson advised its shareholders to reject an improved offer from Klepierre, saying it continued to undervalue the business.

READ: French real estate group Klepierre gives up on attempt to buy Hammerson

Following a meeting between the two companies, Klepierre said it had decided to walk away from its takeover attempt because Hammerson “did not provide any meaningful engagement with respect to the increased proposal”.

Hammerson explains why it ditched Intu deal

Now Hammerson, which owns Birmingham’s Bullring centre, said it has decided to call off its takeover offer for Intu following a string of company voluntary agreement (CVA) insolvency deals by retailers looking to reduce rent bills.

“While Hammerson has proven its portfolio is well positioned to weather the current environment, the equity market now perceives a heightened level of risk associated with the UK retail property sector as a whole,” the company said in a statement.

The UK high street has come under pressure from rising online competition and weaker consumer confidence. The struggles in the UK retail market have led to the collapse of Toys R Us and Maplin while New Look has decided to close a number of stores.

The restaurant sector has also been hit by a slowdown in consumer spending with Jamie's Italian, Prezzo and Byron all opting for closures and reduced rents through CVA processes.

Hammerson has also received opposition to the Intu deal from a number of shareholders, including Dutch investment firm, APG, which has a 7% stake in the firm. Investors had raised concerns that the deal could dilute the company’s portfolio of sites. 

No surprise market is cautious on the deal, says Numis

Analysts at Numis said: “From conversations we have had with investors over the last few weeks, sentiment has shifted materially against the deal; even when it was first announced, sentiment was mixed and given the challenges seen across the retail landscape through 1Q18 (which are expected to be sustained) as well as a failed approach for HMSO (Hammerson) by Klepierre, it is no surprise that the market is cautious on a deal that would have seen HMSO gear up at the top of the cycle while increasing its UK exposure from 49% to 72% proforma and committing to sell £2bn of assets into a highly illiquid and selective market.”

The analysts noted that under Takeover Panel rules, Hammerson must still put the offer to a shareholder vote. While Numis believes it is unlikely shareholders will approve the deal, it said it “is not beyond the realm of possibility”.

“We see two further points for consideration: 1) having rejected Klepierre’s proposed 635p approach (20% discount to 1Q18 NAV), does today’s announcement mean HMSO mgmt may now seek to re-engage with Klepierre to secure a higher bid (in our view 675p/-15% vs NAV is a level that is likely to be relatively appealing to investors)?; and, 2) having launched the bid in December and made such a positive case for the merger, we wonder whether HMSO shareholders will seek to hold mgmt to account for essentially tilting at windmills.”

 

Quick facts: Hammerson

Price: 222 GBX

LSE:HMSO
Market: LSE
Market Cap: £1.7 billion
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