(Bloomberg Gadfly) -- When the facts change, it's time to change your mind. The long-running effort to create a mega-mall operator in the U.K. has collapsed after Hammerson Plc's shareholders opposed the developer's 3.4 billion-pound ($4.8 billion) takeover of rival Intu Properties Plc. Chairman David Tyler and CEO David Atkins have salvaged some credibility, but their repair job is just beginning.
The Intu deal was hardly a bargain to start with, even if the synergy benefits made it look worthwhile. It was also starting to look a much riskier proposition than when it was unveiled in December. While the headline value of the all-share offer was pitched at a substantial discount to Intu's net asset value, the buyer's own shares suffer from a similar markdown. If you assume Hammerson stock is worth the NAV -- what the company says its assets are worth -- the purchase price was much higher.
The outlook for the U.K. consumer has since deteriorated. There have been some high-profile store and restaurant failures, and stock market sentiment has soured on retail and commercial property shares. That would have complicated Hammerson's plan to sell some of the combined company's assets to reduce its domestic exposure.
Hammerson can't pull or cut the price of its offer, so it is left awkwardly telling its shareholders to block the deal when it comes up for a vote. It is now in both sides' interests to call off a poll that looks destined to fail. If Intu also withdrew its recommendation for the deal, the current bid could be quickly put out of it misery. Theoretically, Intu could agree to a new deal at a lower price. Maybe. It's hard to see lead shareholder John Whittaker consenting to that just yet.
The stature of Hammerson's management has been dented. French rival Klepierre SA gatecrashed the Intu deal by making an approach for Hammerson in March. The target responded by reiterating its desire to buy Intu. On an April 5 call with analysts to discuss its first-quarter numbers, Hammerson was at it again, brushing off concerns about the weakness of the retail industry.
Two weeks later, and the tune has changed. True, Hammerson executives had to sound committed to the deal while it was on. But Tyler and Atkins have been slow to grasp the nettle.
Klepierre said it was willing to pay 635 pence a share for Hammerson -- 25 percent more than Wednesday's price. It can't make a hostile bid for six months. But it is allowed one shot at an agreed deal -- and the poison pill of Intu has been removed for now.
Rightly, Hammerson is acting like it still needs to defend itself, promising further asset sales where it can get good prices, and cash returns to shareholders.
Klepierre shareholders balked at buying U.K. malls, just as Hammerson's did. If Tyler and Atkins can now show the British company's holdings are worth what they say they are, Klepierre might yet be able to find a price that works for both sets of shareholders.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
©2018 Bloomberg L.P.