Takeover talks between Hammerson and Klépierre have come to a close, clearing the way for Hammerson to proceed with its takeover of rival intu.
Shares in Hammerson fell by 13% to 453p following the announcement this morning. The share price represents a steep discount to its NAV of 790p a share. Before Klépierre’s approach for Hammerson was first revealed, shares were trading at around 435p.
Klépierre said that Hammerson “did not provide any meaningful engagement” and has decided not to make a formal offer.
Klépierre’s two bids of 615p a share and 635p a share valued the company at around £5bn.
The first offer, made in January, was for 615p per share, which Hammerson said “significantly undervalued” the company.
Following Klépierre’s decision to walk away from a deal, Hammerson said that it “welcomes the clarification provided by the announcement”.
Share price journey
In the past 30 years, Hammerson has traded at above 635p only between November 2005 and May 2008, and in the first half of 2015.
Its average share price since 1988 has been about 68% of Klépierre’s offer this week, and since the start of 2010 its share price has hovered at an average of 513p.
Rodamco made a takeover approach for Hammerson in November 1988, offering 818p per share, which Hammerson also rejected.
In a striking parallel to Klépierre’s offer, Hammerson traded at about 415p per share in the weeks leading up to Rodamco’s bid before rising to close to 550p by January 1989.
After rejecting the offer, Hammerson’s share price fluctuated between 200p and 400p for much of the following 15 years.
It took until 2005 for Hammerson’s share price to reach 818p, but it has not hit that level since 4 October 2007.
Missed opportunities?
At the end of 2010, intu – then Capital Shopping Centres – rejected a £3bn takeover from Simon Property, which valued the company at 425p per share.
Historically, intu had traded above that level between 2003 and the second half of 2008 before the financial crisis took it as low as 187p in 2009.
Although intu recovered to a degree in the following years, it closed at above 400p on only two more occasions, which explains why Hammerson’s offer was 40% below Simon’s offer seven years earlier.
Since 2015 intu has steadily fallen from about 375p to the low 200s.
Hammerson and intu – better together?
Analysts at Peel Hunt have expressed their concern surrounding Hammerson’s proposed takeover of intu.
In a note it highlights that the proposed combination would increase exposure to UK shopping centres, which it says is “an arguably challenged and overvalued asset class”.
The move would also reduce its exposure to premium outlets in Ireland and France. However, Hammerson chairman David Tyler has remained adamant on the decision.
He said: “The board is confident in the intrinsic value of Hammerson and its prospects. It is entirely focused on delivering value for shareholders in the shorter and longer term.”
Hammerson said a takeover of intu will “set the benchmark for European retail destinations”.
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