What’s the story behind merger hitch?

A FEW weeks ago two of the UK’s largest property shopping centre owners who were looking to merge suffered a setback.

Hammerson, the owner of the Bullring, was looking to take over Intu, the owner of Merry Hill.

Is this setback a further indication of the tough times on the high street?

If the deal between Intu and Hammerson completed, we would have seen a sum of £3.4 billion paid by Hammerson.

However, the board of Hammerson later advised shareholders that the deal was not such a good idea.

What caused this change in sentiment? It could be down to the recent spate of high profile administrations such as Maplin’s or Toys R Us.

One thing certain is that players like Intu and Hammerson will have the benefit of analytical data which will enable them to understand their tenants’ turnover within their shopping centres, given that rents are usually linked to turnover.

If this information has always been available to Hammerson, then why is it now trying to move away from the Intu deal?

Surely Hammerson’s original motivation for the deal, namely to concentrate upon having the best shopping centres within the UK, is still a powerful reason to do the deal?

Maybe it is not just about size, it is also about not having a propensity for tenants who are constantly being squeezed, as surely an anchor tenant in the Bullring may also have leases within Merry Hill and the other locations.

Therefore, this could be storing up trouble, as currently administrations only represent a loss of income of around one per cent for companies like Intu and Hammerson and the merger could see this figure rise. We all know that Debenhams and House of Fraser are currently facing pressures.

What is clear is that Hammerson will seek to dispose of some of its assets and re-invest the money into other premium sites.

Who knows, as when all of this started French company Klépierre was looking to pay £5 billion for Hammerson.

But this was rejected by Hammerson as it felt it undervalued its business.

This may come back albeit through another suiter.