Shares in Intu rocketed on Friday after confirmation that a consortium of investors is mounting a multibillion-pound takeover of the shopping centre owner.
Peel Group, owned by John Whittaker, is leading a group consisting of Saudi Arabia’s Olayan and the Canadian property investor Brookfield in a bid to take control of Intu.
Whittaker is deputy chairman of Intu and Peel Group holds around 26% in the shopping centre firm, while Olayan holds about 3.5%. Shares in Intu closed up 27% at 189p on Friday, giving the business a value of about £2bn.
Shares in the property companies British Land, Hammerson and Land Securities also rose on the back of the news.
Retail analyst Nick Bubb said: “At this level, despite the near £5bn of debt and the pressure on rental values, you’d think that buying Intu was a pretty cheap way into its two flagship assets, the Trafford Centre in Manchester (which is valued at £2.2bn gross) and Lakeside (which is valued at £1.3bn gross).”
Intu is behind 18 shopping centres across the UK, including the Trafford and Arndale Centres in Manchester and Metrocentre in Gateshead. Its shares have been under pressure since a £3.4bn takeover by rival Hammerson fell through earlier this year.
In an announcement after the close of trading on Thursday, Whittaker’s group said: “The consortium’s consideration of the possible offer is at a preliminary and exploratory stage and no approach has been made to the board of Intu.”
Intu said it had not received an approach from the consortium but added: “The board has formed an independent committee comprising all directors of Intu other than John Whittaker, who is connected to the consortium.”
“The independent committee will consider any approach from the consortium, if made, and a further announcement will be made if and when appropriate.”
The consortium has until 1 November to make a firm offer for Intu.
Financial pressure on Intu is expected to increase as tenants including New Look, Toys R Us and Prezzo restructure or enter administration.
The stresses on the business are emphasised by the number of investors shorting the stock, selling borrowed shares in the belief they can profit from completing the trade with shares bought later at a lower price. About 40% of Intu’s shares that are accessible to short-sellers were out on loan at the close on Wednesday, according to data from FIS Astec Analytics.
“Intu thought this was a cyclical problem ... whereas our point is this is a secular shift to internet shopping, that you have the wrong asset class,” said hedge fund manager Crispin Odey, which has a long-term short position in Intu.
Peel Hunt analysts ruled out the possibility of competing bids, given the size of the consortium’s existing shareholding, and said a takeover could offer an opportunity to take the company private. Analysts said such a move would enable the issues facing the business to be handled “outside the public glare” and that any offer would be at a material discount to net asset value.
“An offer at 190-200p per share may therefore provide the consortium with potential upside but would it be attractive enough for the remaining Intu shareholders?”
