Intu takeover set to put Hammerson on top of JSE
The Hammerson deal bumps Nepi Rockcastle to second place in terms of property firms by size on the JSE
Hammerson is set to regain its position as the largest property company on the JSE if it succeeds with its takeover of Intu Properties to become a real estate giant with a £7bn (R126bn) market capitalisation.
South African investors would then have exposure to a large, highly liquid real estate group that paid returns backed by hard currency and was run by one of the best-rated European management teams, according to Meago Asset Management’s Jay Padayatchi.
Based on Wednesday’s market close, the deal would result in Hammerson bumping eastern European real estate group Nepi Rockcastle, which has a R122bn market capitalisation, to second place in terms of property firms by size on the JSE.
The board of Hammerson, which owns high-quality shopping centres in western Europe, and the board of Intu, which owns top-rated retail assets in the UK and Spain, announced they had reached an agreement.
They agreed on "the terms of a recommended all-share offer by Hammerson to acquire the entire issued and to-be-issued share capital of Intu", they said in a joint statement.
"The boards of Hammerson and Intu believe that there is a compelling strategic rationale for the acquisition, which will bring together their high-quality retail property portfolios and their combined expertise to create a leading European retail real estate investment trust with a strong income profile and superior growth prospects.
"Both boards believe that following the acquisition, the enlarged group will be better placed to enhance its position in its geographic markets and across its retail formats, with a more efficient and adaptable platform allowing it to respond to fast-changing consumer preferences and retail trends," the statement said.
Under the terms of the acquisition, Intu shareholders would receive 0.475 new Hammerson shares for each Intu share.
Based on the closing price of 534.5p per Hammerson share on December 5, the terms of the acquisition represent a value of about 253.9p per Intu share, equivalent to £3.4bn for the entire issued and to-be-issued share capital of Intu.
Hammerson CEO David Atkins said the combined portfolio would be worth £21bn and include pan-European high-quality retail and leisure destinations, with enhanced exposure to high-growth markets.
Garreth Elston, a fund manager at Golden Section Capital, said the bid was positive for both groups. "Hammerson’s offer is a 28% premium to Intu’s last closing price, but is still at a 37% discount to Intu’s net asset value."
For Intu shareholders "it’s an intrinsically fair price for a counter that has lost 28.21% post-Brexit, with seemingly little chance of any catalyst that would ignite a price recovery", said Elston.
"By comparison, Hammerson has recovered post-Brexit and was up by 4.19% pre-deal, but following the bid we expect Hammerson’s price to decline as the acquirer," he said.
For Hammerson, the deal would increase its dominance of large UK retail centres, add complementary Spanish assets, plus enhance earnings and net asset value.
"But this will be dependent on the company managing to dispose of weaker assets and to achieve post-acquisition cost synergies. Hammerson is one of our preferred UK retail real estate investment trusts, but this is primarily due to its European diversification, and we continue to remain cautious on the short-and medium-term outlook for the UK," said Elston.