Top shareholder backs Hammerson u-turn on Intu merger
A shareholder has backed Hammerson’s plan to walk away from the deal.
One of Hammerson’s top shareholders has backed the company’s decision to walk away from its takeover of rival Intu, saying executives “should be applauded for taking a difficult decision”.
Hammerson said on Wednesday it hopes to ditch its £3.4 billion takeover of Intu by urging a shareholder vote against the acquisition amid growing dismay over the health of the UK retail property market.
The Birmingham Bullring owner issued a shock market announcement saying that it was withdrawing a recommendation for a vote in favour of the takeover, which it said was “no longer in the best interest of shareholders”.
Top 20 shareholder J O Hambro Capital Management, which owns around 1.8% of Hammerson, praised the change in strategy.
In a statement, J O Hambro said: “Whilst we were not negative on the Intu transaction, we appreciate the change in view taken by the Board and the decision to focus on the higher growth parts of the portfolio such as value retail and Ireland.
“The board should be applauded for taking the difficult decision to change direction from that laid out in December when the Intu merger was announced, as it became increasingly apparent how negative sentiment had become towards UK retail assets in general.”
Hammerson’s share price was up by more than 4% on the news, while Intu’s fell by 3%.
It comes just months after Hammerson made an all-share offer for Intu in December, but the company said stock markets had since soured on the sector.
The equity market now perceives a heightened level of risk associated with the UK retail property sector as a whole Hammerson
“Despite the resilience of Hammerson’s portfolio and strong operating metrics in Q1 2018, the equity market’s perception of the broader UK retail property market has deteriorated since the start of the year,” Hammerson said in its update.
It added: “Over the last five months, the financial strength of retailers and other tenants in the UK has softened and a number of retailers have entered into administrations or CVAs, while consumer confidence has also remained subdued.
“Whilst 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.”
It said that, after “extensive engagement” with shareholders, the board had concluded that the “heightened risks” associated with the takeover outweighed the long-term rewards.
Hammerson chairman David Tyler said: “In recent weeks, investors have told us they share our view of the exceptional quality of our portfolio and that they have great confidence in our management team.
“The board has complete conviction in Hammerson’s prospects as a standalone business as we pursue our plans for future growth.”
The deal with Intu was set to create Britain’s biggest property company, with £21 billion worth of assets across Europe.
Intu operates the Trafford Centre in Manchester, while Hammerson owns the Bicester Village and Brent Cross shopping centres.
But the takeover target said Hammerson’s explanations for why it was urging shareholders to ditch the deal were “unsatisfactory”, noting that Hammerson had reaffirmed its intention to go ahead with the deal as recently as March 19.
“The board of Intu is entirely confident of Intu’s commercial future and prospects. The trading update issued yesterday underlined the key strengths of Intu’s business,” Intu said.
The company said it would update shareholders on its plans “in due course”, and that its board will be meeting to discuss Hammerson’s new position.
If shareholders decide to follow Hammerson’s recommendation, it would bring an end to months of takeover posturing in the retail property market.
French shopping centre firm Klepierre walked away from a potential deal with Hammerson last week, after holding a meeting with its takeover target to table a £5.04 billion proposal worth 635p per share.
Klepierre said it would not make a formal offer because Hammerson “did not provide any meaningful engagement”.
Hammerson, meanwhile, had branded Klepierre’s overtures “wholly inadequate” and “entirely opportunistic”.