Hammerson has agreed to buy Intu Properties. Both are shopping centre investment companies.
Intu shareholders will own 45% of Hammerson shares if they agree to the deal.
The merger would bring some of the UK's biggest shopping centres under the same roof. Intu owns Bicester Village, while Hammerson owns the likes of Manchester's Trafford Centre.
The combined pan-European property portfolio will be worth £21 billion.
(Reuters) — British shopping centre investment company Hammerson Plc said on Wednesday it has agreed to buy Intu Properties in a deal valuing the smaller rival at about £3.4 billion ($4.56 billion).
Increased online shopping and uncertainty stemming from Britain's vote to leave the European Union have hurt demand for British commercial rental property, according to the Royal Institution of Chartered Surveyors.
The all-share offer represents a value of about 253.9 pence per Intu share, a premium of 27.6% to its close on Tuesday.
Intu shareholders will receive 0.475 new Hammerson shares for each Intu share, the companies said. The deal would result in Hammerson shareholders owning about 55% of the combined company and Intu shareholders owning the rest.
Hammerson shares were down 4.2% while Intu shares surged by 18% by 8.25 a.m. GMT (3.25 a.m. ET).
Hammerson said it expects the deal to add to earnings in the first full financial year following closing.
The combined company will be led by Hammerson CEO David Atkins and Chief Financial Officer Timon Drakesmith. Hammerson Chairman David Tyler will also retain his position.
Hammerson said it expects pretax synergies for the combined company to reach a run-rate of about £25 million per annum by the end of the second year.
There will be a one-off integration cost of about £40 million, Hammerson said.
Hammerson also said it expects dividend growth of the combined company to be at least in line with its historical dividend growth.