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Intu Properties soars on £3.4bn Hammerson bid

6 December 2017

Pressures on shopping centre operators see see two real estate investment trusts agree to all-share merger.

The real estate investment trust sector lit up today as Intu Properties (INTUP) agreed to a £3.4 billion bid from rival Hammerson (HMSO).

Shares in Intu, which owns and manages shopping centres in the UK and Spain, jumped 19.5% or 39p to 238p, slightly short of the 253.9p valuation implied by the all-share offer.

Hammerson, whose shareholders will own 55% of the enlarged group, saw its shares slip 11p or 2% to 523.5p as investors assessed the risk of creating a £21 billion pan-European shopping centre giant as consumers switch online.

Hammerson chief executive David Atkins and chief financial officer Timon Drakesmith will lead the company after the takeover with its chairman David Tyler also remaining in place.

The company expected to incur one-off integration costs of about £40 million but to make annual, pre-tax synergies of around £25 million after one year. It said the deal would enhance earnings this year and would not affect its dividend growth.

The takeover comes after a long period of weakness in Intu shares, which have fallen 25% over five years and had traded at 34% discount to net asset value according to analysts at Liberum.

Shares in other Reits rose on the news but Mike Prew, equity analyst at Jefferies, said the impact would be limited.

‘This is not a cash bid for a high-quality UK Reit by an overseas buyer which would trigger a re-rating of the sector but a coalition of weak business models with 25% INTU shareholder Peel Holdings preferring to take its chances with HMSO management … and greater liquidity in the shares,’ he said in a note to investors.

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