The purchase of a 3.5% stake in shopping centre REIT Liberty International by a giant US property company could herald a takeover of the company.
JP Morgan property analyst Harm Meijer said that the purchase by Simon Property Group, a retail specialist and the largest public US property company should be taken seriously, and not just seen as an opportunistic share purchase.
‘We believe one possible way of looking at this is that Simon Property’s stake is not a short-term trading transaction and may eventually result in a takeover bid,’ he said, citing six reasons:
Liberty is one of the most expensive property companies in Europe in JP Morgan’s view
JP Morgan economists believe that the dollar may rise further against the pound
Simon Property’s management is well regarded by JP Morgan US colleagues and industry
Simon Property has a strong balance sheet and may see strong value creation opportunities in Liberty’s shopping centre portfolio, as it could for example bring in international retailers and shopping centre knowledge
Liberty’s portfolio is hard to replicate and Simon Property may see this as the only way to get access to the UK and would be happy to pay a premium for that
JP Morgan believe Liberty needs a new strategy and Simon Property’s move may fit in this
‘The main questions remain why now and why not a straight takeover bid?,’ Meijer added. ‘We can think of two possible theories, although we must emphasise again that none of the companies mentioned have made comment. First, former chairman Mr. Gordon may not be willing to sell his 22% stake, but Simon gives a signal to Liberty that it is serious. Secondly, another company, for example Westfield, may have approached Liberty and Simon is acting as a white knight for now.’
Liberty shares rose 8% to 945p today, and the sector as a whole moved 4% higher as a result of Simon’s interest.