Hammerson rights issue – Hammerson has announced a proposed rights issue to raise gross proceeds of approximately £552m and the sale of substantially all of the company’s 50% interest in VIA Outlets to a mutual fund managed by APG Asset Management N.V. for estimated cash proceeds of approximately €301m (equivalent to approximately £274m), to raise a combined total gross proceeds of approximately £825m, £794m net. (£29m of fees!). Money raised will pay down debt to about £2.2bn, an LTV of 41.7%.
Hammerson has received irrevocable undertakings from its two largest shareholders, APG and Lighthouse Capital (who hold about 20% and 14% respectively), to vote in favour of the rights issue, and to take up their rights in full. Lighthouse has also undertaken to vote in favour of the sale (APG is obviously conflicted on this).
Sales of property will continue as soon as market conditions stabilise, with the aim of achieving an appropriate capital structure for the long-term.
Hammerson says that it is also introducing a new leasing model in the UK based on experiences with brands, its existing lease structures in Continental Europe and the more collaborative approach of premium outlets. This new approach will include more flexible leases, rebased rents at more affordable levels, indexation replacing the existing rent review system and an omnichannel top-up element.
Rights Issue and share consolidation
Forgive us – this is complicated
Hammerson will consolidate its shares on a 1 for 5 basis – in other word for every five shares you own now, you’ll now have one.
Then, under the rights issue, you’ll be offered 24 new shares for every one share you own [that’s a huge ratio and shows how desperate the situation is]. That amounts to 3,678,209,328 new shares.
The price of these new shares will be 15p (3.41 rand for the shares listed in Johannesburg) –
- a discount of 94.6% to the closing price of 279.8p on 5 August 2020
- a 41.4% discount to the theoretical ex-rights price of 25.59p
[Yesterday shareholders had shares worth 56p in share price terms and 458p in NAV terms (down from 582p in June 2019. Today they are being offered shares at the equivalent of 3p. Had this not been structured as a rights issue, shareholders would have seen most of their remaining value wiped out. However, doing this as a rights issue protects their interests.
Assuming this goes ahead, for every five shares you held yesterday – worth 279.8p in share price terms (5 x 55.96p) – you’ll now have one share.
You have the right to buy 24 more shares at 15p – that clearly represents a massive transfer of value from the old shares to the new shares
1 share at 279.8p + 24 shares at 15p (24 x 15 = 360p) = 25 shares worth a total of 639.8p or 25.59p each – that is the theoretical ex rights price.
If you don’t have the money to subscribe for the rights issue, or just don’t want to invest any more money in Hammerson, you can sell your rights. In theory, 24 rights would be worth 24 x (25.59 – 15) = 254.2p. So now you’d have your original stake which was worth 279.8p but is now worth 25.59p plus 254.2p in cash – in other words you wouldn’t have lost out. That is the theory anyway – in practice, rights are a bit like warrants – hugely more volatile than the share price. What price they fetch will depend on whether investors feel that this deal has stabilised the situation at Hammerson or not (remember, in theory, the EPRA NAV of the new consolidated shares after the rights issue is 112p).]
Fractions of shares will be sold for the benefit of shareholders but amounts less that £5 or equivalent will be kept by the company.
The rights issue and the capital reorganisation are subject to shareholder approval and approval of the VIA deal.
Disposal of VIA
The consideration is based on a gross asset value for Hammerson’s share of the VIA portfolio of approximately €641m and represents a net initial yield of 6.5% and an 18.7% discount to gross asset value as at 30 June 2020. The final consideration is subject to a number of customary balance sheet adjustments at completion.
Completion is subject to a number of conditions including shareholder approval and obtaining merger control approvals in Germany, Spain and Portugal – expected to be in the fourth quarter of 2020.
VIA is a 50:50 joint venture between Hammerson and APG. VIA operates eleven premium outlets in nine European countries providing over 267,000 m2 of floor space and over 1,130 stores. VIA is one of the leading premium outlet operators in Europe, with the third largest portfolio by area. As at 30 June 2020, the market value of the VIA portfolio was approximately £1.4bn. For the six months ended 30 June 2020, the loss attributable to VIA was £20.9m.
HMSO : Hammerson rights issue
I own 950 shares in Hammerson. I feel in long run its an opportunity to hold hammerson. How to buy rights issue share and when to or please clarify the process?
Hi, the company is publishing a prospectus today. The meeting to vote on the proposals is scheduled for 1 September. The share consolidation would then happen on 2 September. Dealings in the rights start on 10 September and payment for any rights (the 15p per share) is due on 24 September by 11am. The new shares start trading on 25 September. Hope that helps.
I currently own 2762 shares in Hammerson at a cost of £2500. Assuming my shares are consolidated 1 to 5 I will then own 552 shares with the option to purchase 24 x this at a cost of 15p (552×24=13257×0.15 =1988) this means my overall investment would be 2500 + 1988 = £4488 and I would own 13257 shares at TERP of 25p meaning my investment would be 13257×0.25= £3314.25. Is this right? I’m trying to get my head around it all before I cut my losses and sell
Hi Mike – by my reckoning, you would own 13257+552= 13,809 shares at a TERP of 25.59 = £3,533.72
I have 455 at a cost of £223.07. I have now 91 shares. I am new to all this so not sure what happens next. Can someone please help me to understand
Hi Salik, your 455 shares were consolidated into 91 shares – by itself, this would not have affected the value of your holding. Last night the shares closed at 292p, valuing your stake at £265.72 – you are making a small profit.
Now you have the rights to buy 24×91 = 2,184 new shares at 15p each = £327.60. These rights are tradeable from 10 September. You should have a choice as to whether to pay for the new shares or sell your rights. It is best to check with your trading platform or broker about how to do that.
What’s the likely effect of the share dilution on Hammersons share price after the 25th of Sept? Considering that the shares have been going down
I bought Hammerson shares back in May at 134p at a total cost of £5,000. I now have 744 shares after the consolidation and I am currently down by 60%. The value is now at £2,000. Can someone help me clarify the following please:
From my understanding, I have the option to purchase (744 * 24 shares) = 17,856. So 17856 + 744 would mean I would own 18,600. So 17,856 shares at 15p would cost me another £2,678.40 which would bring my total investment of Hammerson alone up to £7,678.40.
Current price now is 265.20 so this plus 360p would mean the TERP would be 25.008p right? So all in all, my new overview would be 18,600 shares and if I were to sell, it would be worth (18600 * 25.008p) = £4651.49, meaning 7,678.40 – 4,651.49 = 3026.91 right?. If this is the case, then my value is pretty much the same as if I do not take up this offer.
Can someone clarify if this assumption would be correct please as this is the first time that I’ve faced this on my portfolio.
Also, if I do take up this offer, could I sell them all at anytime? And if I don’t take up this offer, could I hold my current shares? or would I have to sell everything on a specific date?
Sorry for the long post, just wanted clarification as I would like to cut my losses like Mike.
Any help would be appreciated :).
Hi Toni,
The shares will be marked “ex-rights” on 10 September – that should be the day of the big share price fall. The price I have for Hammerson right now is 263p. All else excluded, that implies a share price on 10 September of 24.92p and a rights price of 9.92p. What happens between 10 September and 25 September is anyone’s guess I’m afraid. There’ll probably be a bunch of hedge funds trading the rights which could make the price swing around quite a bit.
Hi Peter, your maths look correct to me – the theory is that you are no worse off whether you take up the rights or sell them. In practice, the value of the rights will depend on supply and demand as always. If a lot of investors decide that they don’t want to commit more money and buyers cannot be found for their rights, the rights price will fall.
There are no restrictions on dealing except those imposed on you by whichever platform you deal with. The new shares should be available to deal in from 25 September. If you hold paper certificates, these are expected to be sent out on 9 October.
Thank you James,
Could you also clarify one more thing for me (I apologise because this is all new to me)
So from 10th September, I will automatically receive 17856 shares (744 * 24). But then at the same time, the share price of Hammerson will fall drastically let’s say 90%?
From 25th September, I will the option to either
1. Purchase these right shares at 15p each, so from my previous post adds to my total investment of £7678.40 in total
2. Sell my rights. If I sell my rights, what happens next? Does that mean my total number of HMSO shares will revert back to 744 but what about the share price?
Basically my main question is, am I gonna lose out big if I choose to sell my rights from 25th September? As I am already just less than 60% down.
Sorry, I just wanted further clarification as I am confused on what to do next and I do not want to further lose out on this.
Hi Peter, the theory is that if you do nothing, you won’t be worse off – but as I pointed out earlier, once the hedge funds etc start dealing in the rights anything could happen.
Just to clarify, you should be able to sell or buy the rights between 10/9 and about 17/9 – it will depend on the platform you use setting this up. The new shares will start trading on the 25th.
Hi James,
What was the when shares should have been held to be eligible for rights issue shares? I keep buying and selling them and not sure if I am entitled to rights issue shaes.
The record date for the rights issue was 5:30pm yesterday (7 September) – that’s the day when, if your name is on the share register, you’ll get told you are getting the rights. BUT the ex-rights date is 8:00am on 10 September. If you buy Hammerson ordinary shares today and tomorrow, you will be legally entitled to the rights but the paperwork might not come through in time for you to deal in them. Similarly, if you sold your Hammerson today and tomorrow, you might still get told you’ve got some rights but legally they won’t be yours. I know that’s a recipe for confusion, sorry.
Thanks James. I hold a long CFD position on HMSO. Am I correct that I will be entitled to rights issue?.
Now we are getting into more complex territory – my guess (and it is only a guess) would be no – if you don’t actually exercise the underlying option, you don’t own the shares and so you aren’t entitled to the rights. Having said that, I would have thought that the contract would have some protections built in for this type of situation – maybe you would get some monetary compensation. Best check with your broker I think.
Hi James, is it compulsory to fully take up the rights for 15p based on the number of shares held? Or can i purchase just a few more as i find it expensive to buy more based on the large number of shares i already have.
It is not compulsory. Let your broker/platform know how many rights you want to take up and sell the rest.
I have taken up my full entitlement under the rights issue. Should I have received a share certificate by now? (I received the certificate for the consolidated new shares very promptly)
Hi Peter, the share certificates will be posted on 9 October