Having upped its bid to 635p and been turned down flat French real estate investor Klepierre is walking away from a deal for shopping centre landlord Hammerson (HMSO).
Unsurprisingly the shares fall 12% to 457.4p. Management now face the difficult task of convincing a sceptical market of the merits of its tie-up with rival Intu Properties (INTU) first announced in December 2017 and currently being worked through.
They are likely to find that their efforts are measured against that 635p mark and whether in time the business can trade above it. Otherwise arguments that Klepierre’s approach ‘significantly undervalued’ the business will ring rather hollow.
The consolidation effort by Hammerson reflects the structural pressures on retail property as online shopping has boomed. However, the deal has attracted criticism on the grounds it will increase exposure to a pressured UK market and concerns over execution risks.
DOUBTS OVER INTU DEAL
Jefferies analyst Mike Prew says: ‘Prior to the indicative bid being announced, the share price had a hit a low of 434p versus our price target of 400p. We doubt the Hammerson share price will drop to these low levels immediately as we believe there will likely be some on-going bid speculation.’
AJ Bell investment director Russ Mould says: ‘By turning down the bid, management have increased the pressure on themselves to get the tie-up with Intu right.
‘The market response to the deal has not been positive with Hammerson’s shares dropping 20% since between it being announced in December 2017 and news of Klepierre’s interest emerging.’
