Off the ta­ble, up in the air

Deals in the global re­tail prop­erty space could be­come in­creas­ingly ac­ri­mo­nious as mall own­ers jos­tle for pole po­si­tion

Financial Mail - - MONEY&INVESTING - Joan Muller

Ham­mer­son’s about-turn on its R357bn mega-merger plans with UK mall owner Intu Prop­er­ties has placed the lat­ter in a pre­car­i­ous po­si­tion. The Intu board can stand its ground and in­sist that share­hold­ers still vote on the deal, or the com­pany can back away qui­etly.

In terms of Ham­mer­son’s pro­posed all-share of­fer for Intu, the terms of which were agreed by both par­ties in De­cem­ber, the deal does not au­to­mat­i­cally col­lapse.

Ham­mer­son is still obliged to con­vene a share­holder meet­ing to con­sider the Intu ac­qui­si­tion — un­less Intu agrees other­wise. If Intu doesn’t give its con­sent to Ham­mer­son to can­cel its share­holder vote, Ham­mer­son’s of­fer will only lapse if at least 50% of its share­hold­ers vote against the merger. Both Ham­mer­son and Intu are dual-listed in Lon­don and on the JSE and have a size­able share­holder base in SA.

It will be in­ter­est­ing to see what route Intu chooses, given that the com­pany is clearly unim­pressed by Ham­mer­son’s sud­den change of heart.

Ham­mer­son’s de­ci­sion last week to with­draw its rec­om­men­da­tion to share­hold­ers to vote in favour of the Intu ac­qui­si­tion came shortly af­ter French-listed mall owner Klépierre made two un­suc­cess­ful bids for Ham­mer­son. That may have up­set the ap­ple cart.

In March, Klépierre of­fered £5bn to ac­quire Ham­mer­son’s en­tire share cap­i­tal, which was raised slightly to around £5.16bn this month. Both bids were re­jected by Ham­mer­son as man­age­ment be­lieved it un­der­val­ued the com­pany. How­ever, Klépierre’s un­ex­pected play for Ham­mer­son caused a rally in the com­pany’s share price, sug­gest­ing that the mar­ket was per­haps more in favour of a tie-up with Klépierre than with Intu.

Klépierre’s shop­ping cen­tre port­fo­lio is val­ued at €23.4bn, roughly dou­ble the size of Ham­mer­son’s, at around £10.5bn. Intu’s port­fo­lio is the same size as Ham­mer­son’s.

Ham­mer­son CEO David

Atkins last week cited softer UK re­tail con­di­tions amid sub­dued con­sumer con­fi­dence as well as mar­ket con­cerns over the ex­tended pe­riod that it would take to com­plete the trans­ac­tion as key rea­sons for the board’s de­ci­sion to with­draw sup­port for the Intu ac­qui­si­tion. How­ever, Intu’s board is not buy­ing that. CEO David Fis­chel said this week in re­sponse to ques­tions from the Fi­nan­cial Mail that the rea­sons pro­vided by Ham­mer­son for re­vers­ing its de­ci­sion are “not con­sis­tent with the com­mu­ni­ca­tions they and we have is­sued over the past few weeks”.

He re­ferred to a pos­i­tive trad­ing up­date made by Ham­mer­son on April 5 in which no men­tion was made of any con­cerns re­lat­ing to the Intu deal.

“Intu is­sued a sim­i­larly up­beat trad­ing up­date on April 17 an­nounc­ing record re­tailer de­mand with 60 new leases signed, a sta­ble oc­cu­pancy and sig­nif­i­cantly out­per­form­ing na­tional bench­marks on foot­fall,” said Fis­chel. He noted that hardly a month ago, on March 19, Ham­mer­son reaf­firmed that it was “fully com­mit­ted to the Intu deal, which the board con­tin­ues to be­lieve will de­liver sig­nif­i­cant value for Ham­mer­son share­hold­ers”.

Fis­chel added: “With this in mind, we don’t agree that there has been a de­te­ri­o­ra­tion in the re­tail en­vi­ron­ment be­tween March 19, April 5 and now. Re­tail­ers are fac­ing chal­lenges, but these are no dif­fer­ent to the ones they faced six months ago.”

Fis­chel said the Intu board will meet in the com­ing days to con­sider, among other things, whether it will give con­sent to Ham­mer­son to can­cel its share­holder vote.

Ei­ther way, SA prop­erty fund man­agers be­lieve there is lit­tle chance of the deal ma­te­ri­al­is­ing. The fact that Ham­mer­son’s share price

David Atkins: Cited softer UK re­tail con­di­tions amid sub­dued con­sumer con­fi­dence

Robert Tsha­bal­ala

David Fis­chel: We don’t agree that there has been a de­te­ri­o­ra­tion in the re­tail en­vi­ron­ment

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