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UK shopping centre landlord Hammerson has agreed to sell its stake in Bicester Village owner Value Retail for cash proceeds of £600mn to LVMH-backed private equity firm L Catterton.
The long-awaited deal to sell the out-of-town designer outlet operator is a milestone for Hammerson, which is pushing through a turnaround plan focused on cutting debt, selling non-core assets and refreshing its major city centre retail properties.
“It is really a game-changer,” said Hammerson chief executive Rita-Rose Gagné. “We have been working on this for a long time.”
Value Retail runs nine luxury retail outlets outside European cities such as Barcelona and Brussels, including the Bicester Village location outside Oxford.
The sale of Hammerson’s stake to a vehicle set up by L Catterton comes after a brutal period for shopping centre owners, who were hit by the rise of online shopping and the Covid-19 pandemic, contributing to a sharp drop in property values.
Recently, however, some investors have become more optimistic about these properties, with landlords such as Land Securities looking to buy more major shopping centres as their prices have fallen.
Hammerson has set aside £350mn from Monday’s deal to reinvest in its core assets, including the Bullring in Birmingham and London’s Brent Cross, and to increase its stake in properties where it does not have full ownership.
Selling out of Value Retail was made more difficult by the complex structure of Hammerson’s stake, which included an interest in the company and different stakes in particular outlets. Hammerson’s investment had been built up over decades since the late 1990s.
The deal represents a £1.5bn enterprise value for Hammerson’s stake in Value Retail, a multiple of 24 times earnings before interest, taxes, depreciation and amortisation. Eastdil Secured was lead financial adviser to Hammerson, while JPMorgan advised L Catterton.
Hammerson shares rose about 6 per cent in early trading on Monday.
Hammerson has been seeking an exit from its minority stake in part due to its lack of control over the company. Gagné said the investment had “an extremely complex structure with little to no liquidity”.
L Catterton, a consumer-focused investment firm, was set up by Catterton, LVMH and Bernard Arnault’s family holding company. Gagné said finding a buyer who was acceptable to Value Retail founder, New York businessman Scott Malkin, had been “key to making it work”.
Following other asset sales, Gagné said the deal “really turns the page after three years of intense turnaround work”.
The company will allocate £95mn to reduce net debt, leaving it with a loan-to-value ratio of 23 per cent when the deal closes. It will also return up to £140mn to shareholders through share buybacks and increase its dividend to 80-85 per cent of adjusted earnings, up from 60-70 per cent.
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