Shopping centre investment company Hammerson has has agreed to buy Intu Properties in a deal valuing the smaller rival at about £3.4 billion.
Increased online shopping and uncertainty stemming from Britain's vote to leave the European Union have hurt demand for UK 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 yesterday.
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 has interests in several shopping centres in Ireland, including Dundrum Town Centre, the Swords Pavilions, the Ilac Centre on Henry Street in Dublin. It also has a stake in Kildare Village.
Hammerson shares were down 4.2% while Intu shares surged by 18% in morning trade in London.
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 £25m a by the end of the second year.
There will be a one-off integration cost of about £40m, the company added.
Hammerson also said it expects dividend growth of the combined company to be at least in line with its historical dividend growth.
