Intu soars on takeover report
• Orion Capital Managers still looking for partners for buy-out, says analyst
Shares in struggling mall owner Intu Properties, which was formed out of Donald Gordon’s Liberty International in 2010, surged nearly 24% on Monday, the biggest oneday gain in 11 months, after reports that private equity firm Orion Capital Managers wants to buy it out and delist it.
Shares in struggling mall owner Intu Properties, which was formed out of Donald Gordon’s Liberty International in 2010, surged nearly 24% on Monday, the biggest one-day gain in 11 months, after reports that private equity firm Orion Capital Managers wants to buy out the company and delist it.
The company’s share price climbed 23.75% to R7.92 in morning trade before closing 14% higher at R7.30, its highest close since August 2, following a report in the UK’s Sunday Times that UK-based private equity group Orion Capital Managers wants to acquire Intu.
Intu, which owns 17 malls in the UK and three in Spain, has faced extreme pressure since the Brexit referendum of June 23 2016. The share price was at R68.01 on June 22, the day before the vote to leave the EU, but has since fallen nearly 90%.
Uncertainty around the Brexit process has caused investors to devalue commercial property across the UK.
Intu’s JSE-listed UK-invested peers — Capital & Counties, Hammerson and Capital & Regional — have also seen their share prices take significant knocks in recent years.
Intu has also been hit by store closures and several high-profile retail failures. It has used company voluntary agreements (CVAs) with a number of its tenants, which has put pressure on its rental income.
A CVA is an insolvency procedure used to help retailers restructure leases. They also do not have to pay all the money they owe to creditors while under CVAs. Tenants such as Debenhams, House of Fraser, Toys R Us, New Look and HMV have used CVAs.
Intu’s debt burden has skyrocketed and as of the end of June, its net external debt was £4.9bn (R89bn). Its market capitalisation was about R9.9bn on Monday at midday.
CEO Matthew Roberts said in July that Intu would sell noncore properties and possibly exit Spain in order to raise cash and decrease debt.
He said he wanted Intu to diversify away from retail assets. It would develop about 6,000 residential units, including apartments and houses, in order to earn rental income over the next few years.
Orion is looking for equity partners to support the takeover.
Nedbank property analyst Ridwaan Loonat said it is not clear yet if Orion will succeed in taking over Intu. “Nothing has been confirmed yet; it’s still in the early stages. Orion Capital Partners are interested but are looking for other parties to partner with them in the transaction,” he said.
“If it’s private equity driven and it is successful, Intu is expected to be delisted. Given the current loan-to-value, a delisting may be favourable as unlisted funds generally tend to enjoy higher gearing than listed players,” he said.
Intu would not comment on speculation around a takeover.
Other companies have tried to take over Intu in the past two years, including UK and Europe mall owner Hammerson and a consortium including Peel Group, which is the vehicle of Intu’s deputy chair, John Whittaker, Canadian firm Brookfield and Saudi Arabia’s Olayan Group. Both takeovers failed after talks collapsed.
UNCERTAINTY AROUND BREXIT HAS CAUSED INVESTORS TO DEVALUE COMMERCIAL PROPERTY ACROSS THE UK