L Catterton, the private equity firm backed by French luxury fashion house LVMH Moet Hennessy Louis Vuitton SE, has agreed to purchase Hammerson Plc’s stake in outlet mall landlord Value Retail in a deal valuing the corporate at £1.5 billion ($1.9 billion).
The deal includes interests in nine luxury properties outside major European cities, including the Bicester shopping centre, around 60 miles northwest of London, it said in an announcement on Monday. Hammerson will generate money proceeds of £600 million. The company has been looking for to sell assets and reduce debt for several years because it struggles with falling rents and values for retail properties.
Hammerson shares rose as much as 10.2 percent in London on Monday, the most important every day gain in greater than eight months. The reason for that is plans to make use of the proceeds from the sale to purchase back shares value as much as 140 million kilos and to extend the dividend payout to 80 to 85 percent of adjusted profit.
While Value Retail’s coveted outlet malls, which magnetize tens of millions of international shoppers, are among the many properties which have been most resilient to the rise of online shopping, Hammerson has long sought to exit its minority stake, partially since it lacks control of the corporate.
“The divestment refocuses our portfolio on prime urban real estate with a restructured capital structure and the capacity and ability to pivot our strategy to higher yielding opportunities while increasing shareholder returns,” said Rita-Rose Gagne, Chief Executive Officer of Hammerson.
The deal, which is at a 24% discount to gross asset value, will reduce Hammerson’s loan-to-value ratio to 23%. In addition, the corporate’s portfolio is targeted on large shopping centres and mixed-use projects in city centres. The transaction is predicted to shut within the second half of this yr.
The proposed buyback amount of £140 million represents roughly 10% of market capitalisation.
L Catterton is increasingly actively investing in prime retail properties as the corporate seeks greater control excessive locations for its brands.
“We have extensive experience investing in luxury retail and are keen to leverage our operational expertise and global network of established relationships to partner with Value Retail and advance the business,” said Michael Chu, global co-chief executive officer of L Catterton.
Eastdil Secured, Morgan Stanley and Lazard advised Hammerson on the deal, while JPMorgan Chase & Co. acted for L Catterton.
