Overview:
Hammerson Plc’s holdings in nine upscale outlet malls, including Bicester Village, will be sold by Value Retail to LVMH-backed private equity group L Catterton for a sum of £1.5 billion. Hammerson will raise £600 million in cash from this deal, pay down its debt, and be able to concentrate on high-end urban real estate, which will expand its stock by 10.2%.
In Details:
Value Retail, the landlord of outlet malls, has agreed to sell Hammerson Plc’s interest to L Catterton, a private equity fund supported by the French luxury fashion house LVMH Moet Hennessy Louis Vuitton SE, for an enterprise value of £1.5 billion ($1.9 billion).
According to a statement released on Monday, the deal included stakes in nine opulent retail locations located outside of major European cities, including the Bicester shopping village, which is located about 60 miles northwest of London. Hammerson, which is struggling with declining retail property values and rents, has been on a multiyear push to sell assets and reduce debt. This deal is expected to bring in £600 million in cash.
Hammerson’s stock saw its largest intraday increase in over eight months on Monday, rising as much as 10.2% in London. The company aims to increase dividend payouts to 80%–85% of adjusted earnings and repurchase up to £140 million in stock from the proceeds of the transaction.
Although Value Retail’s highly sought-after outlet malls, which draw millions of tourists from across the world, have shown to be among the assets most resistant to the growth of e-commerce, Hammerson has long sought to sell its minority investment, partly due to its lack of authority over the business.
Rita-Rose Gagne, Chief Executive Officer of Hammerson, stated, “The disposal concentrates our portfolio on premium urban real estate with a transformed capital structure and the capacity and capability to advance our strategy in higher yielding opportunities with stronger returns, while enhancing returns to shareholders.
With the purchase, Hammerson’s loan to value ratio will drop to 23% from 24% below gross asset value. Additionally, it means that the company’s portfolio is now primarily composed of big malls and mixed-use projects in urban areas. It is anticipated that the acquisition would close in the latter part of this year.
Approximately 10% of its market capitalization is represented by the £140 million proposed buyback amount.
In an effort to have more influence over the best sites for its brands, L Catterton has stepped up its investment in premium retail spaces.
Michael Chu, the co-chief executive officer of L Catterton worldwide, stated, “We have extensive experience investing in luxury retail, and we are eager to use our operational expertise and global network of established relationships to partner with Value Retail and drive the business forward.”
