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Hammerson's U-turn welcomed by brokers but "orphaned" Intu is left in the cold

Published: 11:40 19 Apr 2018 BST

Businessman fighting off a dinosaur
The Hammerson board might go the way of the dinosaurs into extinction

The Hammerson PLC (LON:HMSO) directors are facing a “Martin Sorrell day of reckoning” after jilting Intu Properties PLC (LON:INTU) at the altar this week.

That's the view of US broker Jefferies, which reckons the Hammerson board's position is now untenable after it rebuffed a bid approach from French real estate company Klepierre to pursue its takeover of Intu only to get cold feet over the latter after some shareholders expressed displeasure.

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

Despite questioning whether Hammerson can now deliver on its pledge to grow dividends by 6-8% a year following the collapse of the Intu deal, it has upgraded the stock to 'hold' from 'under-perform' and bumped up the price target to 540p from 400p.

Barclays has also upgraded Hammerson, in its case to 'equal weight', with a price target of 520p.

It described the decision to stop courting Intu as a U-turn that was “better late than never”.

It believes Hammerson is better off as a stand-alone business but say the Hammerson board still has questions to answer.

“The Hammerson board concluded only four months ago that it would be in the best interests of shareholders to merge with Intu, only to decide now that Hammerson is able to drive better value on a standalone basis. Given how little has changed in the underlying market on a company level and on a share price level, we wonder how well the standalone scenario was considered and investigated in the first place,” the broker said.

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

Intu, meanwhile, is described as “orphaned” by Jefferies and as “out in the cold” by Barclays.

“Intu’s 27% shareholder Peel Holdings was seeking a cheap deal to avoid doing an even cheaper one as shopping centre economics continue [to] deteriorate,” Jefferies suggested.

Jefferies has cut its price target on Intu to 155p from 175p to reflect the “instability” of Peel's shareholding.

Barclays has downgraded Intu to 'underweight' with a price target of 180p and says it sees a challenging outlook for Intu on a standalone basis.

A high loan-to-value ratio combined with toppy valuations of its assets and a benign retailer outlook suggests things will get tougher still for Intu.

“We do not believe there are any other likely buyers for the portfolio out there,” Barclays said. The Intel board is clearly unhappy with Hammerson's “unsatisfactory” explanation for calling off the deal but Barclays says there is little it can do.

Shares in Hammerson were up 0.9% at 519p in late morning trading while Intu was down 3.7% at 192.5p.

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