Hammerson is withdrawing its recommendation for its proposed £3.4bn tie-up with rival shopping centre owner intu, saying the deal is “no longer in the best interests of shareholders”.
In a statement released this morning, Hammerson’s chairman, David Tyler, said: “After careful consideration, the board has concluded it is no longer in the best interests of shareholders to carry out the Intu acquisition.
“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.
‘Complete conviction’
“The board has complete conviction in Hammerson’s prospects as a standalone business as we pursue our plans for future growth.”
The bid has to continue under takeover panel rules, so Hammerson has asked shareholders to vote against the deal.
READ MORE: Hammerson shareholder ‘to vote against intu bid’
Hammerson said it would carry out a review, including looking at possible disposals and a capital return to shareholders.
The proposed takover, which was first announced in December, would have created the UK’s largest shopping centre owner. The deal appeared to threatened when French retail giant Klépierre made two approaches for Hammerson at 615p and 635p. However, it abandoned the £5bn takeover talks on Friday.
Chief executive David Atkins, who has championed the deal in the face of criticism from some shareholders, said today: “Hammerson is an ambitious company with a disciplined approach to the pursuit of compelling investments to strengthen its portfolio.
“It is clear that the heightened risks to the intu acquisition now outweigh the longer-term benefits.
“We have a clear strategy that has delivered consistent, strong returns on a standalone basis and we look forward to updating the market in the near term on our plans to accelerate the delivery of further value for shareholders.”
Hammerson said its recommendation was withdrawn because the equity market’s perception of UK retail property had deteriorated since the start of the year and this had led to “a disconnect between the company’s share price and the fundamental value of its business and prospects”.
Intu displeased
Intu is not happy with the result. In a statement, intu said: “Intu regards as unsatisfactory the explanations given by the board of Hammerson for its withdrawal of its recommendation of the intu transaction, a transaction which intu has been pursuing in good faith.”
The company reported occupancy, rental, and footfall growth in a trading update yesterday.
Shareholder response
The failed takeover is expected to be the subject of debate at Hammerson’s annual meeting next Tuesday.
Dutch pension fund APG, one of the company’s top three shareholders, with a 7.2% stake, said: “We were very pleased to read this morning’s announcement by Hammerson that its board is now withdrawing its recommendation to its shareholders to vote in favour of the intu acquisition.”
In a joint statement, James Lowen and Clive Beagles,co-managers of top 20 shareholder JOHCM UK Equity Income Fund, said: “We are pleased with the announcement made this morning by the Hammerson board.
“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 roadmap laid out by the board today is very clear and should, when executed, lead to the closure of the gap between the share price and the net asset value, which stands at close to 40%. 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.
“The strength of the Hammerson portfolio and its diversity created the ability for that pivot decision to be taken and is also the foundation that should drive growth in earnings and dividends in future years and the closure of the value gap in the short term.”
“The proposed merger of Hammerson and intu was on thin ice right from the beginning,” said Hemant Kotak, managing director at Green Street Advisors.
“Intu has been struggling for a long time, its shareholder returns have been woeful over most time periods and it is unsurprising that its largest shareholders wanted an exit – the surprising element is that it took as long as it did. Unfortunately for them, they are back to square one due to Hammerson’s late change of heart – or perhaps more accurately, the discontentment of some of their largest shareholders forced the board’s hand to change their recommendation.
“Hammerson blamed the weakening of market fundamentals, but this has bemused observers – in the past couple of weeks both companies reported trading statements with confident outlooks for the businesses, and we have yet to see any real fallout with retailers.
“In truth the retail environment is in a precarious state, the public market for REIT shares makes no secret of this. The interesting question is why Hammerson’s management only started seeing this now? They should, after all, be the experts.”
READ MORE: Was Hammerson right to spurn Klépierre?
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