The mooted 220p knock-out bid for intu implies a fully diluted market capitalisation of just under £3bn, which when added to net debt of about £4.7bn at the end of June implies an enterprise value of about £7.7bn.
This, in turn, implies a discount of 11.6% to the end-of-June valuation of intu’s properties of about £8.7bn.
Perhaps no bigger than the fall in values one might expect in the second half of 2018, given the well-trailed woes of the retail industry and the -5.6% fall in values recorded by intu’s portfolio in the first half of 2018. However, before any such pricing could be used as comparable evidence for valuing individual properties elsewhere in the market, allowance would have to be made for the fact that the buyer is acquiring corporate liabilities and an operating business as well as the assets, as well as the fact that this is a huge portfolio rather than an individual property.
While the notion of a portfolio premium or discount has been much misused over the years, it must be valid to argue in this situation that some of the discount that might be implied by a successful bid for intu would represent a portfolio discount to compensate the buyer for acquiring a large number of very sizeable and illiquid assets in a very unpopular sector of the property market.