Shopping centre giant Hammerson has called off its £3.4bn mega-deal with Intu, citing the weakness of the current market.
In a statement to the market this morning, the board of Hammerson said that the financial strength of retailers and other tenants in the UK has softened, noting administrations and stores closures.
"Whilst Hammerson has proven its portfolio is well positioned to weather the current environment, the equity market now perceives a heightened level of risk associated with the UK retail property sector as a whole," they said.
"It is also apparent from extensive engagement with shareholders, in particular in recent weeks, that there is a wide range of views on the merits of the Intu acquisition. As a result, the board of Hammerson has concluded that the heightened risks associated with the Intu acquisition outweigh the long-term rewards that can be expected in comparison to other strategic options open to the company."
Intu had sought to dispel concerns yesterday by releasing a trading update early, in which it played down the impact of Toys R Us, New Look and Prezzo store closures.
But the deal was already in trouble after Hammerson shareholders raised concerns. An approach from Klepierre with a £5bn takeover offer for Hammerson, which it later abandoned, also put a spanner in the works.
Hammerson also said that it would focus on its own business and is reviewing options to accelerate shareholder value. This could include investing in higher-growth segments such as premium outlets, and making some disposals.
Retail landlords have had a rough few months as chains including Jamie's Italian, Prezzo, Byron, New Look, and Select all opted for closures and reduced rents through company voluntary arrangement (CVA) processes.
Meanwhile Toys R Us, East, and Maplin have all gone into administration.
This means several shopping centres are losing tenants or receiving drastically reduced rents.
Read more: Hammerson treads water on Intu takeover as it awaits Klepierre's next move
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