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Yours For £700M — 2 Shopping Centre Companies With £3.4B Of Assets

An extension to Capital & Regional's mall in Hemel Hempstead

Much-anticipated merger and acquisition activity came to the beleaguered UK shopping centre sector this week, with one potential take-over announced and another in the works. The deals could see two companies with net assets of £3.4B trade hands for less than £800M.

Capital & Regional said it had received an offer to buy a majority share in the company from Growthpoint Properties, South Africa’s largest REIT. The company did not specify what size stake Growthpoint might buy or what it would pay.

Cap & Reg’s shares rose 11% following the announcement, but that should be taken with a pinch of salt — the shares rose from 16p to 18p. The company has a market capitalisation of £131M and a portfolio valued at £797M. Its shares trade at a 65% discount to its net asset value of £384M.

The company said in half-year results for the period to 30 June that its net rental income had dropped 3% to £25M as a result of retailers going out of business and asking for rent reductions through company voluntary arrangements.

A deal would be Growthpoint’s debut acquisition in the UK. It has £7.3B of assets across all sectors in South Africa, including the V&A Waterfront development in Cape Town, once owned by the Livingstone Brothers.

In another piece of potential shopping centre M&A, the Sunday Times reported that Orion Capital is looking for partners for a potential take-over of Intu, the shopping centre REIT in which it owns a 9% stake. Intu’s shares jumped by almost 25% to 43p on the news. At that level the company has a market cap of about £600M.

The company’s shares trade at an 85% discount to its net asset value of £3B. Investors are worried about the company breaching debt covenants.

The FT speculated that Orion might team up with Peel Holdings, which owns 27% of Intu, to bid for the company.

The M&A news comes as a new report from PwC and the Local Data Company laid bare the carnage in UK retail property. A net 1,234 chain stores closed in the first half of 2019, an increase of 10% on 2018, and a huge leap from the 222 which closed in the first half of 2017.