(Reuters) - Intu Properties INTUP.L shares jumped more than 27 percent on Friday, lifted by news of a potential cash takeover offer for the business as it grapples with a downturn in Britain's bricks-and-mortar retail sector.
A consortium comprising Peel Group, Saudi Arabia's Olayan and property investor Brookfield Asset Management BAMa.TO announced late on Thursday that it was considering a bid for Intu, the CEO of which stepped down in July when it swung to a loss and warned of lower growth in rental income.
Pressure on retail property specialist Intu, the company behind sites such as Manchester’s Trafford Centre, is expected to increase as tenants including New Look, Toys R Us and Prezzo restructure or enter administration.
“Intu thought this was a cyclical problem ... whereas our point is this is a secular shift to internet shopping, that you have the wrong asset class,” said hedge fund manager Crispin Odey, which has a long-term short position in Intu.
Olayan and Peel Group, the investment vehicle of the family of billionaire John Whittaker, together hold 29.9 percent of Intu. Under British takeover rules the consortium has until Nov. 1 to make a firm offer or walk away.
“A cash bid for Intu should warrant serious consideration by its shareholders ... Intu’s prospects as a standalone entity are threatened by above-average financial leverage, which limits its ability to self-fund growth and maintenance capex,” Liberum analysts said.
“A cash bid could offer shareholders a chance to salvage value ahead of a potential cash call or dividend cut under a new CEO.”
The stresses on the business are emphasized by the numbers shorting the stock, selling borrowed shares in the belief they can profit from completing the trade with shares bought later at a lower price.
About 40 percent of Intu’s shares accessible by short-sellers were out on loan at the close on Wednesday, according to data from FIS Astec Analytics.
Intu, which has a market value of 2 billion pounds ($2.6 billion), said it had not been contacted by the consortium but had set up an independent committee to consider any approach.
Intu shares were up 27.5 percent at 189.4 pence by 1020 GMT, close to the levels when rival Hammerson HMSO.L dropped a takeover plan in April, blaming Britain's retail gloom.
Peel Hunt analysts ruled out the possibility of competing bids, given the size of the consortium’s existing shareholding and said a takeover could offer an opportunity to take the company private.
The analysts said such a move would enable the issues facing the business to be handled “outside the public glare” and that any offer would be at a material discount to net asset value.
“An offer at 190-200p per share may therefore provide the consortium with potential upside, but would it be attractive enough for the remaining Intu shareholders?”
Reporting by Noor Zainab Hussain in Bengaluru; Editing by Keith Weir and David Goodman
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