L Catterton vehicle buys Hammerson’s stake in Bicester Village owner

British property giant Hammerson has sold its stake in one of the world’s most important luxury retail operators — Value Retail, which owns Bicester Village among other locations. And the buyer is a unit formed by acquisitive LVMH-back L Catterton.

Hammerson holds around 40% of Value Retail and said Monday that it has entered into a binding agreement for the disposal of its entire interest in the business to Silver Bidco Limited. This is a newly-formed company incorporated in Jersey and established by certain affiliates of L Catterton. The deal gives the business an enterprise value of £1.5 billion and generates cash proceeds of around £600 million (€705 million).

Hammerson will use the proceeds for a combination of “significant and immediate deleveraging through a reduction in net debt: and “reinvestment into assets in its core markets” — the city-centre malls that it operates. It will also return capital to shareholders via a share buy-back of up to £140 million.

As well as its Value Retail stake, Hammerson owns major retail properties in the UK, Ireland and France. They include Brent Cross, The Bullring & Grand Central, Dundrum Town Centre and Les Terrases du Port. It has previously disposed of a number of non-core assets — such as its half share of VIA Outlets — in order to reduce its debt.

Value Retail, meanwhile, operates nine outlet villages focused on luxury. They’re in the UK (led by the world-famous Bicester Village), Ireland, France, Germany, Spain, Italy and Belgium. With all of them grouped under the banner the Bicester Collection (reflecting the importance of the UK location) there are also two Chinese outlet villages in the Bicester Collection offering and another due to open this year in New York.

Private equity group L catterton is partly owned by Bernard Arnault’s family holding company and “enjoys a special relationship with LVMH and its family of brands”. Its investments also include labels such as Ganni, Etro, Birkenstock, APC, BloomChic, Kiko Milano, Sugar Cosmetics and many other firms, as well as non-fashion and beauty businesses. It has plenty of experience in direct luxury retail but this is clearly a huge move in that area.

Michael Chu, Global Co-CEO of L Catterton, said: “With its high quality portfolio, reputation for luxury, and commitment to delivering a distinctive experience to customers, Value Retail is well positioned for growth and continued success.

“We have deep experience investing in luxury retail, and we are eager to leverage our operational expertise and global network of established relationships to partner with Value Retail and propel the business forward.”

It all means that Bicester and the other villages will continue to be star locations and benefit from the investment they need to stay that way. 

As for Hammerson, the company said it “will be a retail-anchored, specialist cities business positioned for growth and value creation, with its entire portfolio comprising leading city-centre destinations”.

It added that it’s “primed to drive both rental and earnings growth through reinvestment, and operating leverage from its lean and scalable platform”.

The firm’s board believes the “disposal is in the best interests of shareholders as a whole”.

Hammerson CEO Rita-Rose Gagné said: “This is a transformational deal for Hammerson, generating cash proceeds of c.£600 million whilst removing an overweight, low yielding and minority stake, and positioning us for accelerated growth and value creation.

“The disposal focuses our portfolio on prime urban real estate with a transformed capital structure and the capacity and capability to advance our strategy in higher-yielding opportunities with stronger returns, whilst enhancing returns to shareholders.

“I’m excited about the opportunity this gives us to build on our momentum and track record of the last three years. We are at a point in the cycle where I can now be on the front foot to capture the exceptional value creation opportunities I see in the near, medium and long term. This is exactly what this transaction will deliver.”