* Hammerson shares fall 2 pct
* New 635p bid “underwhelming” -broker
* Shopping centres battle shift online, squeezed consumers (Adds shares, analyst comments, background)
April 11 (Reuters) - French real estate group Klepierre raised its takeover offer for Hammerson to 635 pence per share on Wednesday but the British company said it still undervalued the shopping centre operator and advised shareholders to reject it.
Hammerson said the proposed offer, made up of 50 percent in new Klepierre shares and the rest in cash, was only a marginal increase on Klepierre’s 615p offer which was worth 4.9 billion pounds ($6.95 billion) and which it rejected on March 8.
“The board has considered the revised proposal from Klepierre carefully. At 635p, it is only a 3 (percent) increase on the previous proposal and continues very significantly to undervalue the company,” Hammerson Chairman David Tyler said in a statement.
But he said Hammerson, which in December agreed an all-share offer to buy smaller UK rival Intu Properties, remained open to discuss any proposal from Klepierre which properly reflected the value of the company.
Klepierre’s approach has threatened to disrupt Hammerson’s own plan to buy Intu, which owns the Trafford shopping centre in Manchester. Hammerson’s centres include the Bullring in Birmingham and the Cabot Circus centre in Bristol.
Hammerson shares initially rose as much as 2.3 percent but then fell back and were down almost 2 percent by 0806 GMT.
Analysts were not surprised by Hammerson’s share price fall.
“The announcement of an increased potential offer price for Hammerson could paradoxically result in a fall in Hammerson’s share price today,” analysts at broker Stifel said in a note.
“With the apparent lack of conviction from Klepierre indicating that a substantially higher formal offer will not be forthcoming.”
Broker Liberum Capital called the proposal “underwhelming.”
“We believe Klepierre needs to sharpen its pencil further if they want to be confident of securing the approval of Hammerson’s shareholders, if not its Board,” Liberum said in a note.
Shopping centre operators have been under pressure as consumers shift online, raising questions over the outlook for retail real estate.
This has already spurred M&A activity, including Hammerson’s merger plans with Intu, while Europe’s biggest property firm Unibail-Rodamco agreed in December to buy shopping mall owner Westfield Corp for $16 billion.
In Britain, a squeeze on consumer spending has added to pressure on retail companies. British retail stocks, the most exposed to domestic consumers, are the least preferred within an already unpopular asset class and have had an especially tough start to the year.
Toys R Us UK and electronics retailer Maplin entered administration at the end of February, while early-years retailer Mothercare fell to an all-time low.
Klepierre has until April 16 to announce a firm intention to make an offer for Hammerson under UK takeover rules.
Hammerson’s portfolio includes investments in around 20 prime shopping centres in the United Kingdom, France and Ireland, more than 20 convenient retail parks in the United Kingdom and around 20 premium outlets across Europe.
Paris-based Klepierre owns more than 100 shopping centres across 16 countries but does not have any sites in the UK and Ireland.
Hammerson’s agreed deal with Intu Properties valued its smaller rival at about 3.4 billion pounds.
($1 = 0.7046 pounds)
Reporting by Dasha Afanasieva and Noor Zainab Hussain; editing by Sinead Cruise, Jason Neely and Jane Merriman