There is no shame in admitting that you have got it wrong and essentially that is what Hammerson (HMSO) is doing this morning. The £4bn property company's board has withdrawn its support for a £3.4bn merger with Intu Properties (INTU) made in December.
The move comes just days after French real estate investor Klepierre walked away from its own takeover offer for Hammerson. That bid was pitched at 635p per share but it was rejected.
Hammerson shares unsurprisingly fell on that news although they have bounced on today's developments, up 2.5% this morning to 506p.
Hammerson, the owner of Birmingham’s Bullring shopping centre, blames a deterioration in the stock market’s view of the retail property market since the turn of the year for its decision to abandon the transaction.
But the truth is, investors were never keen on the deal. Major shareholder, Dutch pension fund manager APG, had made its opposition explicit.
INTU SLUMPS ON THE NEWS
Intu, for its part, does not buy this excuse, describing Hammerson's decision to walk away as ‘unsatisfactory’. The £2.7bn property group points out that Hammerson reaffirmed its commitment to the deal as recently as 19 March.
Shares in Intu, the firm behind the Trafford Centre in Manchester, have understandably nosedived, down 3.7% to 200.7p, swiping more than £100m off the company's market value.
The deal it will now lapse if shareholders follow the Hammerson board's new advice to no longer back the deal. A shareholder meeting is likely to be convened in the coming weeks.
ANALYST BACKING
Liberum is one broker that backs Hammerson's change of tack.
‘Hammerson's decision to walk away from its proposed acquisition of Intu is, we believe, the right outcome,' Liberum analysts said on Wednesday.
'Hammerson, on a standalone basis, should be in a stronger position to allocate capital to its faster growing markets, such as premium outlets.’
AJ Bell investment director Russ Mould says: ‘The market has been unconvinced by the deal since the start and subsequent weakness in the Hammerson share price left it open to a bid from French real estate investor Klepierre.
‘While Hammerson shares are higher this morning as investors demonstrate relief at the news, management's future efforts are likely to be measured against this 635p benchmark,’ Mould points out.
