Hammerson's Value Retail deal to have "transformative impact"

(Alliance News) - Hammerson PLC announced a deal Monday to shift its stake in Value Retail, the firm behind Bicester Village, in a balance sheet bolstering move, though done at a discount to gross asset value.

The London-based real estate investment trust owns city-centre shopping centres in the UK and elsewhere.

Hammerson said it has sold its entire minority interest in Value Retail PLC and associated companies to affiliates of L Catterton Partners, a Greenwich, Connecticut-based investor in consumer businesses.

L Catterton came about in 2016 after consumer-focused private equity firm Catterton teamed with LVMH Moet Hennessey Louis Vuitton SE and the family holding company of Bernard Arnault, the CEO of the Paris-listed luxury goods firm.

The deal gives Value Retail an enterprise value of GBP1.5 billion and will generate EUR705 million, about GBP600 million, in cash for Hammerson.

The sum is a 24% discount to the gross asset value, it added.

Hammerson said it will return up to GBP140 million of this to shareholders in the form of share buybacks. The remainder will be used to pay down debt and to reinvest in its core urban retail market.

Following the completion of the disposal, Hammerson will adopt an enhanced dividend policy of paying out 80% to 85% of adjusted earnings. It also will conduct a 10-into-1 share consolidation.

"This is a transformational deal for Hammerson, generating cash proceeds of about GBP600 million, whilst removing an overweight, low yielding and minority stake, and positioning us for accelerated growth and value creation," said Chief Executive Officer Rita-Rose Gagne.

Operating as the Bicester Collection, Value Retail has nine luxury shopping villages outside Barcelona, Brussels, Dublin, Frankfurt, London, Paris, Madrid, Milan, and Munich. Value Retail made a GBP14.8 million IFRS profit in 2023, swung from a GBP5.3 million loss in 2022. Its investment property valuation on December 31 was GBP1.89 billion.

The deal, after a relaxing of UK listing rules, does not need shareholder approval. AJ Bell analyst Dan Coatsworth said the absence of an investor vote "will likely raise some eyebrows", however.

Analysts at Stifel noted the deal was struck a discount to the asset value, though it still took heart from the transaction.

"The deal represents a discount to gross asset value of 24%, but given the tumultuous state of underlying retail property markets over the last decade, the fact the company has managed to reach a deal that has a transformative impact on the company's balance sheet, we think will be viewed as unequivocally positive by the equity market," Stifel said.

Hammerson shares rose 4.1% to 30.24 pence each in London on Monday afternoon.

By Eric Cunha, Alliance News news editor

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