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Published
Apr 18, 2018
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Hammerson withdraws Intu offer, axes merger plan

Published
Apr 18, 2018

Will a day go by this month when Hammerson isn't in the news? Perhaps not. The big story today is that the proposed mega-merger between the shopping centres giant and its smaller peer isn't going to happen.


Hammerson


The company announced Wednesday that it has withdrawn the all-share offer it made in December, despite the fact that it “firmly believed in the strategic rationale of combining Intu's portfolio and the opportunity it provided for value creation in the medium-to-long term.”

But the board has now concluded that the proposed acquisition “is no longer in the best interests of shareholders.”

So why the about-face? The short answer is that its shareholders just weren’t happy. 

But let's hear the company’s longer explanation… It said that despite the resilience of its portfolio and strong operating metrics in Q1, “the equity market's perception of the broader UK retail property market has deteriorated since the start of the year.” It added that “this has led to a disconnect between the company's share price and the fundamental value of its business and prospects. This perception has been intensified by market concerns over the extended period of time that it would take to complete the transaction and realise longer-term returns from the Intu acquisition.”

Hammerson said the board has reassessed the proposed acquisition in light of updated information on current market dynamics in the UK. “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.”

While it insists that its own 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.”

And it added that it's also apparent “from extensive engagement with shareholders, in particular in recent weeks, that there is a wide range of views on the merits of the Intu acquisition.”

Reports at the weekend had suggested that some shareholders were unhappy with Hammerson’s outright rejection of the approach by French giant Klépierre. That had valued the company at 635p per share, despite its shares currently trading at less than 494p each. Shareholder unhappiness came along with threats to vote against the Intu deal.

“As a result, the board of Hammerson has concluded that the heightened risks associated with the Intu acquisition outweigh the long-term rewards that can be expected in comparison to other strategic options open to the company,” it said.

So what happens now? Well, Hammerson has informed Intu of its decision, but under the conditions of its original offer, the withdrawal of the recommendation alone isn't the end of story. The company still has to convene a shareholder meeting to consider the deal and the offer will lapse if its shareholders don’t approve the acquisition at the meeting.

And as far as its future strategic plans are concerned, it said it's committed to maximising value for shareholders in the shorter and longer term and has the highest confidence in its prospects as a standalone business.

Its said its financial and operating performance has been strong in recent months but the board is also now reviewing options to accelerate the delivery of value for shareholders. These actions include reassessing the portfolio mix through appropriate disposals; seeking opportunities to invest further into higher-growth segments such as Premium Outlets and Ireland; pursuing capital returns to shareholders, as appropriate; and targeting the most efficient cost and operating structure “while maximising [the] customer and retailer experience.”

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