Hammerson, owner of upmarket UK city retail destinations with a secondary JSE listing, plans to sell its Value Retail division to Silver Bidco, a new company established by affiliates of L Catterton for £600 million (R14.1 billion) cash.
The sale of Hammerson's “overweight, non-controlling and yield-dilutive interest” in Value Retail at a £1.5 billion enterprise value and for £600m would be a clean exit from a complex structure at a good price, Hammerson said in a statement yesterday.
Value Retail comprises a portfolio of nine upmarket “Village” centres in Italy, Greece, Spain, France, Belgium, and the UK.
“This is a transformational deal for Hammerson, generating cash proceeds of £600m while removing an overweight, low-yielding and minority stake, and positioning us for accelerated growth and value creation,” CEO Rita-Rose Gagné said in a statement.
The deal represented an unlock value from 42% of Hammerson’s total portfolio, she said.
Michael Chu, Global Co-CEO of L Catterton, said Value Retail, “with its high quality portfolio, reputation for luxury, and commitment to delivering a distinctive experience to customers”, was well positioned for growth and continued success.
“We have deep experience investing in luxury retail, and we are eager to leverage our operational expertise and global network of established relationships to partner with Value Retail and propel the business forward,” said Chu.
Hammerson intended to use the proceeds to reduce debt, with a pro-forma loan-to-value ratio of 23%, and for reinvestment into its core assets for higher yields and stronger returns, with a priority on joint venture consolidation and asset enhancement initiatives.
The board also announced that an enhanced dividend payout ratio policy would be adopted of 80% to 85% of adjusted earnings.
“The disposal builds on Hammerson’s track record and momentum of the last three years to accelerate strategic and financial delivery. Hammerson will be a retail-anchored specialist cities business positioned for growth and value creation, with its entire portfolio comprising leading city centre destinations,” Gagné said.
In the medium term, Hammerson expected to deliver an annualised total accounting return (TAR) of 10%, while maintaining a sustainable capital structure and an investment grade credit rating.
Hammerson yesterday also proposed to simplify its share capital through a one for 10 share consolidation, and to increase distributable reserves by reducing the share premium account. Details would be released in a circular in due course, the company said.
Gagné said the disposal focused their portfolio on prime urban real estate with a transformed capital structure and the capability to advance strategy in higher-yielding opportunities with stronger returns, while enhancing returns to shareholders.
“We are at a point in the cycle where I can now be on the front foot to capture the exceptional value creation opportunities I see in the near, medium and long term. This is exactly what this transaction will deliver,” Gagné said.
Hammerson also intended to return up to £140m to shareholders via an on-market share buyback representing 10% of pre-announcement market capitalisation.