Hammerson, a UK-based company that owns premium retail assets in Europe, is to dispose of its entire interest in Value Retail for an enterprise value of £1.5bn, generating cash proceeds of about £600m.
The company said in a statement on Monday it had entered into a binding agreement for the disposal of Value Retail to Silver Bidco, a newly formed company incorporated in Jersey and established by certain affiliates of consumer-focused investment firm L Catterton.
Hammerson intends to use the disposal proceeds to reduce debt and for reinvestment into assets in its core markets at higher yields and stronger returns, it said.
Hammerson CEO Rita-Rose Gagné said it was a transformational deal for Hammerson, generating cash proceeds of £600m while removing an overweight, low yielding and minority stake, and positioning the company for accelerated growth and value creation.
“The disposal focuses our portfolio on prime urban real estate with a transformed capital structure and the capacity and capability to advance our strategy in higher-yielding opportunities with stronger returns, while enhancing returns to shareholders.”
“I’m excited about the opportunity this gives us to build on our momentum and track record of the last three years. 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.”
“With its high-quality portfolio, reputation for luxury, and commitment to delivering a distinctive experience to customers, Value Retail is well positioned for growth and continued success,” Michael Chu, Global Co-CEO of L Catterton, said.
“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.”
Through its affiliate The Bicester Collection, Value Retail specialises exclusively in the creation and operation of luxury shopping destinations. In the UK and Europe it operates nine Villages outside Barcelona, Brussels, Dublin, Frankfurt, London, Paris, Madrid, Milan and Munich.
Hammerson’s board also announced the intention, after the successful completion of the disposal, to adopt an enhanced payout ratio policy for ordinary dividends of about 80%-85% of adjusted earnings.
In the medium term, Hammerson expects to deliver an annualised total accounting return of about 10%, assuming stable yields, while maintaining its commitment to a sustainable capital structure and an investment-grade credit rating.
The disposal is, in the Hammerson board’s opinion, in the best interests of shareholders.
The disposal means Hammerson will forego its share of Value Retail adjusted earnings. For financial year 2024 interest income on cash received is expected to broadly replace earnings disposed with Hammerson's interests in Value Retail, it said.
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