Intu Properties, which was formed out of the late billionaire Donald Gordon’s Liberty International 10 years ago, could get some relief thanks to a potential investment from Hong Kong-listed property group Link. The Reit is in talks with the British mall owner about injecting rescue capital.
Intu confirmed the talks with Link on Monday, sending its share soaring 24.03% to close at R3.20, its best performance since October last year. The company, which owns 17 malls in the UK and one in Spain and counts the Public Investment Corporation and Coronation among its shareholders, is battling for survival because of a hefty debt burden and a weak retail environment.
The group is restructuring its balance sheet to lower its crippling debt, which is nearly 19 times its market capitalisation. In January, it said it was targeting an equity raise but did not specify how much capital it needed.
Intu had net debt of £4.68bn (R88bn) as of its six months to end-June, while its market capitalisation on the JSE as of Monday morning was about R4.5bn.
The Times, a British newspaper, said on Sunday that Link would back a £1bn emergency capital raise for Intu. It said property tycoon John Whittaker’s Peel Group, which owns 27.3% of Intu, is expected to support a capital raise.
On Monday Intu confirmed it was talking to Link but it said was also in discussions with other shareholders, including the Peel Group, which owns just over a quarter of Intu and others, and new investors including Link, “in relation to a proposed equity raise alongside Intu’s full year results at the end of February”.
“The company will make further announcements in due course, as appropriate. There can be no certainty that the equity raise will be implemented nor as to the terms on which any such implementation might occur,” it said.
Link has a market capitalisation of about £17bn (R328bn).
Garreth Elston, chief investment officer at Reitway Global said Intu's challenges would be difficult for any investor to surmount and UK retail was a sector that would remain in flux for a while.
Over the past three years, Intu has received takeover bids from JSE-listed UK and European mall owner Hammerson, as well as a consortium led by Whittaker.
“It’s talk of a potential recapitalisation and another round of speculation about a takeover of Intu. People again are hoping something comes out. They want a way forward but until Intu releases more information, nobody really knows what is going to happened. Link has had issues in Hong Kong and the coronavirus next door will cause it more troubles for a while,” he said.
Intu and other JSE-listed, UK-focused landlords, including Capital & Counties and Hammerson, have been under pressure since Britain voted in 2016 to leave the EU, which has hit consumer and business sentiment.
Keillen Ndlovu, head of listed property at Stanlib, said there was “no doubt that Intu’s share price has been hurt by severe balance sheet or debt issues, over and above the negative impact of growth of online shopping”.
“Therefore, any meaningful interest in injecting equity capital will be a big relief for Intu. They have worked hard to dispose of assets as well as cut their dividend to fix the debt problems. Unfortunately, this has not been enough,” he said.
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