Hammerson has recently sold its 40% stake in Value Retail, the proprietor of Bicester Village and other European outlets, marking a significant strategic shift.
This £1.5 billion deal with LVMH and L Catterton highlights a renewed focus on core assets and is expected to enhance Hammerson’s financial health.
The Sale and Its Details
Hammerson, a leading figure in the UK’s retail property industry, has made a significant move by selling its 40% stake in Value Retail. Value Retail owns Bicester Village, among other European outlets. LVMH, along with its private equity arm L Catterton, has acquired this stake for £1.5 billion.
Strategic Shift and Financial Implications
This sale is part of Hammerson’s broader strategy to focus on its core assets. Chief Executive Rita-Rose Gagné has been steering this change since joining during the pandemic. The divestment aims to shift attention towards large, city-centre malls. Michael Chu from L Catterton highlighted their strong background in luxury retail investments.
It’s worth noting that despite the sale price being almost 25% lower than the most recent valuation of the nine malls in key cities, Hammerson will still net £600 million in cash after accounting for debts. Analyst Matthew Saperia from Peel Hunt believes this transaction could be transformational for the company.
Impact on Hammerson’s Portfolio
Post-sale, Hammerson will retain ownership of ten major shopping centres, including The Oracle in Reading and Westquay in Southampton. These are valued at approximately £2.7 billion. The company plans to allocate the proceeds from the sale in several ways to maximise its financial stability and shareholder value.
£95 million will be used to repay debt. Meanwhile, £350 million will be reinvested into the remaining portfolio, ensuring these assets are enhanced and maintained. Additionally, £140 million will be returned to shareholders via a share buyback programme.
Shareholder Benefits and Financial Stability
Hammerson is also planning to increase its dividend payout ratio from 60-70% to 80-85% of adjusted earnings. This decision aligns with the company’s goal to reward its shareholders while maintaining financial prudence.
The deal significantly reduces Hammerson’s loan-to-value ratio from 44% to 23%. This improvement in financial stability is seen by many experts as a strong step towards future growth opportunities. Gagné described the transaction as a pivotal moment for the company.
The sale to LVMH and L Catterton marks a new chapter for Hammerson, focusing on core assets and financial stability.
This move clearly positions Hammerson to capitalise on future opportunities while rewarding its shareholders.