Union Square owner looks to call off tie-up with Braehead group

Shopping centre major Hammerson is looking to call off plans for its £3.4 billion takeover of rival Intu amid growing concerns over the health of the UK retail sector.

A deal would have brought together the group behind Aberdeen’s Union Square with Braehead-owning Intu, creating an industry giant with a string of assets across the UK and beyond.

However, Hammerson said yesterday that it was withdrawing a recommendation for a vote in favour of the tieup, which it added was “no longer in the best interest of shareholders”.

The change of mind comes just months after the group made an all-share offer for Intu, but the company noted that stock markets had since turned cool on the retail property sector.

In a statement, Hammerson told investors: “Despite the resilience of Hammerson’s portfolio and strong operating metrics in Q1 2018, the equity market’s perception of the broader UK retail property market has deteriorated since the start of the year.

“Over the last five months, the financial strength of retailers and other tenants in the UK has softened and a number of retailers have entered into administrations or CVAS, while consumer confidence has also remained subdued.

“Whilst Hammerson has proven its portfolio is well positioned to weather the current environment, the equity market now perceives a heightened level of risk associated with the UK retail property sector as a whole.”

Chairman David Tyler said: “In recent weeks, investors have told us they share our viewoftheexceptionalquality of our portfolio and that they have great confidence in our management team.

“The board has complete conviction in Hammerson’s prospects as a standalone business as we pursue our plans for future growth.”

If shareholders decide to follow the firm’s recommendation, it would bring an end to months of takeover posturing in the retail property market.

French group Klepierre walked away from a potential deal with Hammerson just last week, after holding a meeting with its takeover target to table a £5bn proposal.

Klepierre said it would not make a formal offer because Hammerson “did not provide any meaningful engagement”. Hammerson – also the joint owner of Glasgow’s Silverburn centre – had branded Klepierre’s overtures “wholly inadequate” and “entirely opportunistic”.

Michael Hewson at CMC Markets said: “It can’t have escaped the notice of bigger institutional shareholders that the risks to UK retail property were starting to become much more of a concern.”