Hammerson in £3bn swoop for Lakeside owner Intu

Hammerson created a £7 billion retail property giant on Wednesday with a takeover of struggling rival Intu, bringing together some of the UK’s biggest shopping centres, including London’s Brent Cross and Lakeside.

The all-share 253.9p offer values Intu’s shares at £3.4 billion and gives Hammerson’s investors a 55% stake in the combined business through the merger, described as a “rescue” by one analyst.

The deal creates a business with £21 billion in assets and over 40 shopping centres, as well as “premium outlets” like Bicester Village.

The price is a 28% premium to last night’s price, but just a 9% premium on the average of the past six months. Heavily indebted Intu has come under pressure this year after warning in July that rental growth would stagnate.

“Given the long-term and significant recent underperformance in Intu’s share price, something had to eventually give,” Liberum’s David Brockton said.

Hammerson chief executive David Atkins said: “We can create a superior operating platform, [with] more focus on income generation.”

Alongside Atkins, Hammerson’s management team dominates with chief financial officer Timon Drakesmith and chair David Tyler remaining in place, but Intu’s boss David Fischel is set to leave.

John Whittaker, the Peel Holdings founder who took shares and a board seat after selling the Trafford Centre to Intu for £1.5 billion in 2010, becomes deputy chairman, having built a smaller stake in Hammerson this year. Intu’s chairman John Strachan, a friend of Atkins for 30 years, helped broker the deal in the summer.

The deal helps the part-owner of Brent Cross capitalise on Intu’s foothold in fast-growing Spain, and increased firepower to fund its £2.7 billion pipeline including Croydon’s Whitgift Centre redevelopment.

Around £2 billion of UK property will be sold off to fund higher-growth developments in Spain and Ireland.

Intu shares gained 37.5p, or 19%, to 236.5p, although Hammerson edged 10.5p down to 524p.

Jefferies analyst Mike Prew said it was “a coalition of weak business models” while Goodbody’s Colm Lauder said Intu’s “lower-grade” shopping centres would be the bulk of sales. The combined debt pile rises to £8.2 billion.

Deutsche Bank and JPMorgan advised Hammerson, Rothschild advised Intu.