The Intu Properties PLC (LON:INTU) (INTU.L) share price has surged 18% higher today after it announced that it has reached agreement on an all-share offer by Hammerson plc (LON:HMSO) (HMSO.L).
The deal will see Intu shareholders receive 0.475 new Hammerson shares for each of their shares in Intu. Based on the closing price of 534.5p per Hammerson share on 5 December, the terms represent a value of around 253.9p per Intu share, which values the entire company at £3.4 billion.
The terms of the acquisition represent a premium of around 27.6% to the closing price of 199p of each Intu share as at 5 December. It is also a premium of 19.2% on the volume weighted average price of 213p during the three month period to 5 December.
The merger is expected to create growth and value creation opportunities according to the investor update. It is also due to provide opportunities for significant rationalisation of the enlarged group’s property portfolio through an anticipated property disposal of at least £2 billion.
In the last year the Intu share price has fallen 11%. That’s a worse performance than other property-related stocks such as Taylor Wimpey plc (LON:TW) (TW.L), Berkeley Group Holdings PLC (LON:BKG) (BKG.L) and British Land Company PLC (LON:BLND) (BLND.L). Taylor Wimpey has gained 30%, Berkeley Group is up 33% and the British Land share price has risen 8% during the same time period.
In my view, the deal makes sense for Intu and for Hammerson. It creates a larger entity which may be better able to overcome the potential risks which are in play across Europe. It may also lead to greater efficiencies, which could mean higher profitability in the long run. While it creates some disruption and uncertainty for investors, I think it could be a successful deal in the long run.
As someone who is bullish on both commercial and residential property at the moment, I’m upbeat about the prospects for the wider sector.