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