Shares in Intu Properties (LSE: INTU) have been under the cosh this year, losing a lot of their value when a planned merger with Hammerson came to nothing.
Excitement was reignited in October when an approach from a consortium comprising Peel Group, Olayan Group and Brookfield Property Group gave Intu shares a boost. The deal was looking good and was expected to lead to a buyout at around the 210p per share level.
But that’s off now, and we are told that “given the uncertainty around current macroeconomic conditions and the potential near-term volatility across markets,” the consortium cannot make an offer within the rules of takeover timescales.
The immediate result was a 40% crash in the share price Thursday morning, though that’s eased off a little as I write and the shares are trading 35% down at 124p.
Worth buying?
Given that I’d previously seen Intu as a decent long-term investment, what do I think now? Thursday’s slump is disappointing, no doubt, though I can’t help seeing a buyout at 210p as undervaluing the long-term potential of Intu — and I think Peel and its consortium partners would have been getting a good deal at that price.
We’re now looking at a forward P/E valuation that has crashed as low as 8.4, and that just seems too low to me. After all, this is the third time we’ve seen merger or takeover interest in Intu this year, and I think the failure of them all is more about current economic uncertainty than a judgment on the underlying value of the firm.
Anything property-related seems to be seen as poison by the markets right now, and I think that’s a mistake.
Big fall
Meanwhile, the share price fall at Restaurant Group (LSE: RTN) has accelerated after the company’s controversial takeover of Wagamama narrowly squeaked through at Wednesday’s General Meeting. Although shareholders approved the deal, 40% voted against it on the grounds that the £559m price tag was too high.
Restaurant Group is paying an estimated £4m per leasehold outlet, and the whole thing is to be funded through a combination of cash, new debt, and a big new rights issue.
Restaurant Group shares lost 15% of their value on Wednesday when the deal was announced, but it seems like that was just the start. On Thursday, presumably as a result of the deeply discounted nature of the planned new rights issue, investors turned their backs on the shares — leading to a further 30% plunge.
Turnaround?
The shares are now down 53% so far in 2018, and down 75% over five years. The owner of Frankie & Benny’s and Garfunkel’s, among other outlets, saw Wagamama as a potential way to revive is flagging fortunes — but has this deal only made things worse?
Chairman Debbie Hewitt spoke of “a raft of new opportunities for us to capitalise on in the months and years ahead,” and I do hope that comes off. But I share the feeling that splashing out that amount of cash on Wagamama is paying too much, at the wrong time.
Even after the price drop, I would not buy Restaurant Group shares.
