The board of Hammerson said that perception of the UK retail market had “deteriorated” since December when plans for a takeover of Trafford Centre owner Intu were announced, its decision to withdraw coming days after major shareholders said they would vote against the deal.
In a statement to the stock market this morning, Hammerson said at the time of the deal, it had “firmly believed” in the rationale behind acquiring Intu, however “the equity market’s perception of the broader UK retail property market has deteriorated since the start of the year. This has led to a disconnect between the company’s share price and the fundamental value of its business and prospects. This perception has been intensified by market concerns over the extended period of time that it would take to complete the transaction and realise longer-term returns from the Intu acquisition”.
On Friday, APG Asset Management, a Dutch pension company with a 7.1% stake in Hammerson, sent an open letter describing the Intu deal as “insufficiently attractive” and said it didn’t consider “UK retail environment risks”.
The criticism followed shortly after news that Hammerson had finally rebuffed a takeover bid of its own, a £5bn offer from French mall owner Klépierre.
Hammerson’s statement continued: “The board of Hammerson reassessed the proposed acquisition of Intu in light of updated information on current market dynamics in the UK. 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.”
The investor said there was now “a heightened level of risk associated with the UK property sector as a whole”, and conceded that its shareholders had “a wide range of views on the merits of the acquisition”.
Intu issued its own statement to the market responding to Hammerson’s announcement, calling the explanations for the decision “unsatisfactory”.
“As recently as 19 March 2018, in its first response to the approach by Klépierre, Hammerson reaffirmed its intention to proceed with the Intu transaction stating that ‘the Board of Hammerson remains fully committed to the Intu transaction, which the Board continues to believe will deliver significant value for Hammerson shareholders’.
“Intu therefore regards as unsatisfactory the explanations given by the board of Hammerson for its withdrawal of its recommendation of the Intu transaction, a transaction which Intu has been pursuing in good faith since its announcement on 6 December 2017.
“The board of Intu is entirely confident of Intu’s commercial future and prospects. The trading update issued yesterday underlined the key strengths of Intu’s business. Intu will further update shareholders in due course on its plans.”
Intu shares dropped by 8.5p to 199.85p this morning. Hammerson shares went up 17.4p to 511p.