Hammerson notes the announcement made by Klépierre and confirms that it recently received and rejected a highly preliminary and non-binding proposal from Klépierre regarding a possible cash and share offer for Hammerson (the “Proposal”). The Proposal, received on 8 March 2018, valued Hammerson at a price of 615 pence per share, comprising 50% in new Klépierre shares and 50% in cash.
The approach by Klépierre is unsolicited and entirely opportunistic in its timing, and the Board of Hammerson has unanimously rejected the Proposal on the grounds that it very significantly undervalues Hammerson, its track record of delivery, the quality of its portfolio, its market positions, and the opportunities it has for future value creation.
The Board of Hammerson remains fully committed to the acquisition of Intu Properties plc (“Intu”) announced on 6 December 2017 (the “Intu Acquisition”), which the Board continues to believe will deliver significant value for Hammerson shareholders.
David Tyler, Chairman of Hammerson, said:
“The proposal from Klépierre is wholly inadequate and entirely opportunistic. It is a calculated attempt to exploit the disconnect between our recent share price performance and the inherent value of our unique and irreplaceable portfolio which is delivering record results. Klépierre is asking our shareholders to accept a price for their Hammerson shares which is not only at a significant discount to their book value but includes a large element of paper in a company which in our view has a lower quality portfolio and lower growth prospects. The Hammerson Board sees absolutely no merit in Klépierre’s Proposal and has unanimously rejected it. The Board strongly advises shareholders to take no action.”
The Klépierre Proposal very significantly undervalues Hammerson
The timing of the Klépierre Proposal is entirely opportunistic. Klépierre is attempting to secure control of an exceptional portfolio by exploiting the unduly pessimistic and indiscriminate interpretation of current retail trends which have led to the Company’s recent share price weakness. The Proposal price of 615 pence per share represents a significant discount of 20.7% to Hammerson’s EPRA NAV per share of 776 pence as at 31 December 2017.
Furthermore, the Board of Hammerson believes that the Company’s published NAV does not fully reflect several of the long-term future value drivers underpinning its businesses. These include the growth prospects for its Premium Outlets business together with its Irish and French portfolios, and its outstanding pipeline of prized developments.
Hammerson has a unique portfolio and a clear strategy to deliver significant future value creation
The management team of Hammerson has created an exceptional portfolio of leading European retail destinations. Driven by a strategy to benefit from the rapidly evolving polarisation in retail markets, the portfolio is focused predominantly on leading assets in growing consumer markets and attractive catchments; creating differentiated destinations; and promoting financial efficiency and partnerships.
The Hammerson Board believes that its unique portfolio, at the prevailing share price, is very significantly undervalued, and would in particular note that it:
· has a very high portfolio concentration of “A” grade shopping centres compared to other European retail REITs1, including flagship assets such as the Bullring, Birmingham; Dundrum Town Centre, Dublin; and Les Terrasses du Port, Marseille;
· includes a one-of-a-kind portfolio of European Premium Outlets led by a 50% stake in Bicester Village, and is the only European listed real estate company which provides meaningful strategic exposure to this high growth sector;
· has an enviable development pipeline of retail and leisure destinations in major European cities, including Brent Cross and Croydon, London; Dublin Central Development and the extension of Italie Deux, Paris; and
· has an exceptional long term track record of delivery, generating high-single digit growth over the last five years in earnings (CAGR: +8.3%2), dividends (CAGR: +7.6%3) and EPRA NAV per share (CAGR: +7.4%4) since 2012 (when Hammerson became solely focused on retail).
Hammerson has opportunities to drive significant future value creation through:
· the incremental optimisation of its portfolio through Hammerson’s leading asset management expertise;
· focused investment to extend and further enhance existing leading assets, such as the onsite extension at Les 3 Fontaines, Cergy, Paris (7% yield on cost5);
· employing Hammerson’s exceptional development skills and long established reputation to deliver its highly compelling prized city development projects; and
· extensions of, and incremental capital investment into, the Premium Outlets platform.
The Intu Acquisition enhances strategic growth and will deliver further value for our shareholders
The Intu Acquisition will combine two high-quality portfolios under Hammerson’s management team. Hammerson will become the undisputed market leader in the UK with 19 of the top 30 shopping centres6. Targeted asset disposals will allow for further reinvestment into higher return pan-European opportunities such as Premium Outlets, Ireland and Spain to deliver future value for shareholders.
The Intu portfolio contains a high concentration of large desirable high-footfall assets and has a wealth of value-enhancing leasing and asset opportunities that can be unlocked by Hammerson’s superior management expertise. The considerable overlap of the two operating platforms presents significant opportunity for efficiencies, with approximately £25 million of cost synergies per annum, and further potential synergies from operational improvements and refinancing opportunities.
The Klépierre Proposal has material disadvantages for Hammerson shareholders
The Hammerson Board believes that Klépierre’s property portfolio is of materially lower quality than that of Hammerson. Furthermore, there appears to be limited commercial rationale behind the proposed combination. The consequence for Hammerson shareholders is that the Proposal would result in minority ownership of a less attractive portfolio with lower growth prospects. Hammerson shareholders should note the following:
· Klépierre has an inherently lower quality portfolio. According to independent research analysts Green Street Advisors, 94% of Hammerson’s shopping centre portfolio (by GLA) is “A” grade compared to only 50% of Klépierre’s portfolio7;
· Klépierre’s exposure is spread over a wide range of countries of varying levels of attractiveness, whereas Hammerson and Intu are specialists in scale in the select catchments in which they operate; and
· Klépierre’s development pipeline is significantly smaller and fundamentally less attractive than Hammerson’s.
There can be no certainty of a firm offer for Hammerson from Klépierre or the terms on which any firm offer might be made. This Announcement is made without the consent of Klépierre.
In accordance with Rule 2.6(a) of the Code, Klépierre is required, by not later than 5.00 p.m. on 16 April 2018, to either announce a firm intention to make an offer for Hammerson in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline can be extended with the consent of the Panel in accordance with Rule 2.6(c) of the Code.
The person responsible for making this Announcement is Sarah Booth, General Counsel and Company Secretary.