Market reacts to collapse of Hammerson-intu merger

The market has begun to give its reaction to the collapse of the huge retail merger, with Hammerson’s share price rising and intu’s falling.

This morning Hammerson, which owns the Bullring and Grand Central, withdrew its recommendation to shareholders that they support plans for a £3.4bn takeover.

David Atkins, chief executive of Hammerson, said: “Hammerson is an ambitious company with a disciplined approach to the pursuit of compelling investments to strengthen its portfolio. It is clear that the heightened risks to the Intu acquisition now outweigh the longer-term benefits.

“We have a clear strategy that has delivered consistent, strong returns on a standalone basis and we look forward to updating the market in the near term on our plans to accelerate the delivery of further value for shareholders.”

Hammerson’s all-share offer was originally announced in December.

intu’s share price rose by one-third in the weeks after the proposed deal was announced but has slowly slipped back to where it was – which itself was a low point for the property group.

Hammerson, whose shares were affected by French shopping centre operator Klepierre’s own £5bn bid for Hammerson, have now regained the ground it lost last week when Klepierre walked away. Most of the gains have come since weekend reports that the intu deal was in danger, and its shares have added a further 3% since the news was confirmed.

Russ Mould, investment director at AJ Bell, said: “The rapid unravelling of the Klepierre-Hammerson-Intu love triangle deals a blow to those investors who feel the unloved UK real estate investment trusts (REITs) sector offers a nugget of value at a time when the FTSE indices trade within 10% of their all-time highs.

“After all, for that value to be unlocked (should any indeed exist) then a catalyst is needed and a successful bid by Klepierre for Hammerson or by Hammerson for Intu may have done just that.

“These ultimately unsuccessful approaches had brought REITs, and especially retail-exposed property landlords, back into the limelight. Intu’s shares have slipped on the news of the withdrawn bid although shares in its former suitor Hammerson are up, to show just how wary investors were of the would-be buyer’s plan to double down on its exposure to British shopping centres.”

Mould points out that Mark Twain’s advice to “buy land, they aren’t making it any more” is still finding some favour.

He said: “Looking at the REITs sector overall, it is easy to spot which parts of the real estate world investors like and which they do not.

“Distribution, logistics and warehouses – all related to the rise of online shopping, click-and-collect and almost-instant customer fulfilment are popular, as are self-storage plays.

“By contrast, the more exposure a REIT has to retail, the City, London more generally and also to new developments, the lower the valuation relative to net asset value and the wider the discount.”

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