The boards of retail heavyweights Hammerson and Intu Properties have reached an agreement on the terms of an all-share offer by Hammerson to acquire Intu, owner of the Trafford Centre, for £3.4bn.
The deal will create a £21bn pan-European portfolio of retail and leisure destinations and set up opportunities for growth in the Spanish and Irish markets, the group said. It will also trigger a disposal programme of at least £2bn of primarily UK assets as the extended portfolio is trimmed.
Aside from the Trafford Centre, shopping centres operated by Intu include the Metrocentre in the North East and Lakeside in Essex, while it co-owns Manchester Arndale with M&G Real Estate. Prize assets in Hammerson’s portfolio include Leeds’ Victoria Quarter, Birmingham’s Bullring and Bristol’s Cabot Circus, which it co-owns with Axa. It also owns out-of-town centres including Ravenhead Retail Park in St Helens. According to industry analyst GlobalData, the deal gives the group a stake in 12 of the UK’s 20 ‘supermalls’.
The enlarged group will be known as Hammerson and will be led by David Atkins as chief executive and Timon Drakesmith as chief financial officer.
David Tyler, chairman of Hammerson, will be the chairman of the group with Peel chief John Whittaker as deputy chairman – Peel had been Intu’s largest single shareholder with a 27% stake. The group overall will have six directors nominated by Hammerson and four directors nominated by Intu.
Tyler said: “This transaction will deliver real value for shareholders. The financial strength of the Enlarged Group and its strong leadership team will make it well-placed to take advantage of higher growth opportunities on a pan-European scale.”
Atkins added: “This marks an exciting milestone in the history of Hammerson. Bringing together the high-quality portfolios of both companies establishes Hammerson as a larger, leading European retail REIT, enhances shareholder returns and supports opportunities for long-term growth.
“The acquisition creates a leading pan-European platform of desirable retail and leisure destinations which are better positioned to serve the needs of our retailers, excite our customers and support our partners and communities. I hold Intu’s high-quality centres in high regard and I look forward to working with a strengthened team to enhance the performance of our entire portfolio.”
The deal saw Intu shares valued at 253.9p each, a premium of 27.6% on yesterday’s closing price. Hammerson shareholders will own 55% of the issued share capital of the enlarged group.
Shareholders will get one Hammerson share for every two Intu shares held. Hammerson shares are currently valued at 523p each.
Whittaker’s Peel Group sold the Trafford Centre in 2010 in a deal that valued the building at £1.65bn, with Peel taking £75m cash and a 19.9% stake in purchaser Capital Shopping Centres, which rebranded as Intu in 2013. Whittaker personally has a 27% stake in Intu.
Following this deal, Peel will hold around 15% of the enlarged group. It will enter into a relationship agreement regarding support for the Hammerson board and maintaining its holding.
Sofie Willmott, senior retail analyst at GlobalData, said that dominance in its operating locations “will bolster the group’s negotiating power with both retailers and leisure operators, helping to create destinations with all-round appeal, enabling the group to better compete with experience-focused Westfield”.
The analyst expects the group to dispose of smaller sites, prioritising supermall development – sites of 1m sq ft-plus with more than 20m visitors annually – enhancing those locations to appeal to shoppers looking for product and retailer choice alongside an exciting food service and leisure offer.