Hammerson Pulls Intu Bid as Shareholder Pressure Prompts U-Turn

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(Bloomberg) -- Hammerson Plc withdrew its 3.2 billion-pound ($4.6 billion) offer to buy Intu Properties Plc after a growing number of its shareholders opposed a deal that would have created the U.K.’s biggest shopping-mall owner.

Hammerson’s initial all-share offer had come as mall owners try to combine to cut costs and focus on premium properties while U.K. consumers endure a year-long squeeze on living standards. That’s contributed to a string of retailers and restaurant groups announcing plans to close stores, slow openings or reduce their rent bills.

“With retail profit warnings at seven-year highs, any deal is likely to be extremely high-risk,” CMC Markets Plc analyst Michael Hewson wrote in a note. “Why double up on retail property when stores are closing and rental income is under threat.”

Intu fell the most since June 2016 and was down 4.6 percent to 198.8 pence at 9:40 a.m. in London trading. Hammerson rose as much as 6 percent, the most in almost a month.

APG Asset Management -- Hammerson’s third-largest shareholder -- said on Friday it would vote against the Intu purchase, citing the pressures on the U.K. retail industry and increased financial leverage. A top-15 shareholder also expressed concerns about the purchase, Bloomberg News reported last week.

Increased Risks

“The equity market now perceives a heightened level of risk associated with the U.K. retail property sector,” Hammerson said in a statement on Wednesday. “Heightened risks associated with the Intu acquisition outweigh the long-term rewards.”

Intu said the explanations for dropping the bid are “unsatisfactory.” Hammerson’s plan was thrown off course when Paris-based landlord Klepierre SA made a separate offer for Hammerson. Those talks ended last week without a deal, meaning the French firm can’t return to the table for six months.

“A suitor could also pursue Intu now that it’s more vulnerable,” Green Street Advisors LLC analyst Hemant Kotak said by email. It is also “entirely possible” that Klepierre could make a new approach for Hammerson in six months, he said.

Before news broke of Klepierre’s bid last month, Hammerson had slumped about 20 percent this year as the worsening retail environment led to concerns that it could damp demand for space in malls.

’Major Blow’

“Hammerson’s withdrawal is a major blow for Intu,” Bloomberg Intelligence analyst Sue Munden wrote in a note. “Faced with online disruption to sales, Intu’s planned investment to upgrade malls may be too slow to move the needle much on net rental income and earnings through 2020.”

Intu, whose malls are less prime than Hammerson’s, this week reported that its prime shopping centers had seen record demand and increased rents in the first quarter compared with a year earlier. The firm had released its trading statement early to try and reassure investors that its best properties were performing strongly.

©2018 Bloomberg L.P.

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