Deal to create £21bn property empire
Takeover hatched by old pals in a London bar
THE owners of some of Britain’s biggest shopping centres are joining forces to create a £21bn property titan. Hammerson, which owns the Bullring in Birmingham ( pictured) and Brent Cross in London, has agreed to buy the owner of Manchester’s Trafford Centre, Intu, for £3.4bn.
The enlarged firm will have a market value of about £7.6bn and own 43 shopping centres, 37 retail parks and other outlets, worth nearly £21bn.
The proposed deal, which values Intu shares at 253.9p each and will saddle the combined group with more than £8bn of debt, comes at a time when high streets are under siege from Amazon and other online rivals.
But Hammerson chief executive David Atkins, who will keep the top job, insisted the future was bright for shopping centres that offer families restaurants, bars, cinemas and other attractions.
Hammerson has an ice rink at its Westquay centre in Southampton and a beach bar at The Oracle in Reading. ‘We are looking to the future with a great deal of optimism,’ said Atkins. ‘Retailers want to trade out of the best centres because they want to showcase their brands. And people want to do more than just shop.’
The 80 sites owned by Hammerson and Intu, mainly in the UK but also in Ireland, Spain and France, still attract more than 820m visitors a year. Atkins said that once the deal is done the group will offload at least £2bn worth of weaker shopping centres to pay down its debts and invest in more profitable sites.
Hammerson also plans to squeeze out annual cost savings of £25m as it renegotiates terms with tenants and suppliers.
Analysts at Morgan Stanley said the deal would give Hammerson control of 17 of the UK’s 25 largest shopping centres. But in a note to clients, they added: ‘The combination will not alter the structural headwinds impacting the retail property space.’
The assault from online rivals has been exacerbated by rising costs, including business rates and the national living wage, leaving many high streets deserted or transformed into a haven for charity and coffee shops, and bookmakers. But occupancy levels remain high at popular shopping centres, with Intu’s sites 96pc full and Hammerson’s more than 97pc full.
But shares in both firms have been under pressure amid concerns about the future.
Intu shares had fallen 30pc since the start of the year. After yesterday’s deal, they rose 13.6pc, or 27.1p, to 226.1p. Hammerson shares fell 6.2pc, or 33p, to 501.5p yesterday, taking losses for the year so far to about 12pc.
Jasper Lawler, head of research at London Capital Group, said: ‘It’s an opportunistic buy. Shareholders will want to see assets sold to fund the deal and to reflect the lower demand for bricks-andmortar stores.’