Brookfield venture considers offer for UK mall owner Intu

Brookfield Property Group has teamed up with Intu Properties’ largest shareholder to work on a potential bid for the UK shopping mall landlord.

Brookfield, which has made a series of bets on retail assets, and billionaire John Whittaker’s Peel Group are considering an offer for the company, which has been struggling as internet sales hit mall owners. The consortium, which also includes Saudi Arabia’s Olayan Group, hasn’t yet approached Intu, which has a market value of about £2 billion(US$2.6 billion).

Shopping centre landlords have been the subject of a flurry of deal making in the past year as the growth of online retail has hit the value of their assets. Unibail-Rodamco-Westfield was created this year through the acquisition of Australian mall owner Westfield by Europe’s largest landlord. Hammerson dropped its own pursuit of Intu in April after fending off a separate approach from Klepierre.

“The consortium’s consideration of the possible offer is at a preliminary and exploratory stage,” Brookfield said in a statement on Thursday. In response, Intu said it has formed an independent committee to consider any approach from the group.

Intu’s portfolio was valued at about £9.8 billion in June, according to the company’s half-year earnings. However, the London-based company’s shares trade at a wide discount to the value of its assets. In July, Intu announced that Chief Executive Officer David Fischel will quit as soon as the company finds a successor.

Since Hammerson abandoned its bid for Intu in April, Intu shares have dropped by about 29 per cent. As a result, an offer in line with Hammerson’s bid of about 254 pence a share would amount to a 71 per cent premium to Intu’s closing price on Thursday.

Intu shareholders would probably welcome such an offer and, given that Peel and Olayan together own almost 30 per cent of Intu, a deal would probably be friendly, Bloomberg Intelligence senior industry analyst Sue Munden wrote in a note.

Any offer for Intu is likely to come at a big discount because the firm needs recapitalising and “cheap” can always get cheaper, Green Street Advisors said in a note this week. Hammerson is unlikely to see a new bid from Klepierre, it said.

Brookfield Asset Management bought US retail landlord GGP earlier this year for about US$15 billion. The company looks for places other investors are running away from, Brookfield Property Partners chief executive Brian Kingston said at the time.