LONDON — British shopping centers giant Hammerson has confirmed that it is calling off the acquisition of rival Intu Properties.
Hammerson had put its purchase project on ice earlier this month, as it waited for an update following an offer to be taken over itself by French realtor Klépierre.
Klépierre eventually abandoned the Hammerson takeover plan after a raised offer failed to ignite a conversation between the companies, but Hammerson still did not proceed with the acquisition of Intu, citing the growing weakness of the U.K.’s high street retail sector as the main reason.
In a statement to the London Stock Exchange, the company said that it “reassessed the proposed acquisition in light of updated information on current market dynamics in the U.K.” The information referred to in the statement highlighted weakening consumer confidence and the reduced financial strength of retailers and tenants at Intu’s properties, including Manchester’s Trafford Center, a number of which had gone into administration, according to Hammerson.
“The equity market’s perception of the broader U.K. retail property market has deteriorated since the start of the year. This has led to a disconnect between the company’s share price and the fundamental value of its business and prospects,” the statement continued. “This perception has been intensified by market concerns over the extended period of time that it would take to complete the transaction and realize longer-term returns from the Intu acquisition.”
The Intu deal was valued at 3.4 billion pounds and would have made Hammerson, which owns high-traffic malls such as Brent Cross in London and Birmingham’s Bullring Center, the biggest property company in the U.K.
Last week, Klépierre raised its initial March 8 proposal for Hammerson by 3 percent to value the company at 5.04 billion pounds, or 6.35 pounds a share. Hammerson said the valuation was inadequate, and Klépierre called the deal off.
“The board of Hammerson did not provide any meaningful engagement with respect to the increased proposal and, after careful consideration, Klépierre has concluded that it does not intend to make an offer for Hammerson,” the French realtor said.
Hammerson said the revised figure from the March 8 proposal of 6.15 pounds per share was “only a marginal increase,” noting that its board had unanimously rejected the original offer as “very significantly” undervaluing the group. At the time of the original offer, Hammerson’s board chairman Davide Tyler said it was “wholly inadequate and entirely opportunistic,” calling it an attempt to exploit a “disconnect” between its share price and the value of its real estate holdings. Meanwhile, Klépierre had said the proposal was made with the intention of “engaging in a constructive dialogue” about the potential tie-up of the two companies.
Mergers have emerged as a key defense mechanism for mall operators struggling to cope with shifting consumption habits, including a $24.7 billion deal struck at the end of last year by Paris-based Unibail-Rodamco to buy Sydney-based Westfield Corp. The combined companies formed a $72.2 billion giant in terms of gross market value, with holdings in 27 countries, and show how some mall owners are seeking survival through scale to confront the challenge of declining traffic as people turn to the convenience of online.