British shopping centre investment giant Hammerson has said it is looking at further investments in Ireland after launching a £3.4bn (€3.85bn) bid for UK rival Intu Properties, writes Pádraig Hoare.
Hammerson, which has a 50% partnership in Dundrum Shopping Centre along with Allianz, said there was significant development potential in Dublin.
A spokesperson for the firm said: “Hammerson is looking to rotate investments across Europe, and that includes increasing its exposure in Ireland.”
The firm, which is the biggest of its kind in the UK, also has interests in the Swords Pavilions and the Ilac Centre in Dublin, as well as Kildare Village outlet shopping centre.
Hammerson agreed to buy smaller rival Intu in a long-speculated deal to create a malls giant controlling £21bn of assets, in an all-share offer.
It will combine Intu, the owner of Manchester’s Trafford Centre, with the FTSE 100 company behind Bicester Village in Oxfordshire, London’s Brent Cross shopping centre and Bristol’s Cabot Circus to form a group that will also have sites in Ireland, France and Spain.
Shopping centre landlords are facing an increasingly tough backdrop as retailers have become more selective with their expansion plans in response to a difficult consumer spending environment and intense competition from online rivals.
“The combination will not alter the structural headwinds impacting the retail property space,” analysts at Morgan Stanley said.
“Despite this, it should increase the combined group’s control of large dominant centres, helping pricing power with tenants; the group will own or partially own 17 of the UK’s top 25 centres by size.”
A tie-up between the pair has often been rumoured and analysts said that Hammerson had struck now in an “opportunistic” move on its smaller rival.
Robert Duncan of stockbroker Numis said that Intu shares have been trading at a greater than 50% discount to net asset value.
“This looks like an opportunistic attempt to get its (Hammerson‘s) hands on Intu’s portfolio which it believes it will be able to operate and manage more effectively than the incumbent owner,” Mr Duncan said.
Hammerson shareholders will own about 55% of the new company and Intu investors will own the rest.
The combined business will be led by Hammerson chief executive David Atkins. Hammerson’s finance chief Timon Drakesmith will assume the same position at the enlarged company and Hammerson chairman David Tyler will retain his role. Following the deal, the shopping centre owner will also take Hammerson’s name. Intu shares, which have lost nearly a third of their value this year, went up about 18% while Hammerson shares fell just under 2%.
Intu investors will receive 0.475 new Hammerson shares for each share they own and investors representing 50.6% of Intu’s stock have already given irrevocable undertakings or letters of intent to support the tie-up.
They include Peel Holdings, the group led by billionaire John Whittaker, which owns 26.6% of Intu. Mr Whittaker will become deputy chairman of Hammerson after the takeover.
Following the deal, the company will sell-off at least £2bn of property to help bolster its balance sheet and Hammerson said it expects the tie-up to add to earnings in the first full financial year following closing.