Short sellers take a big hit as Liberty merger talks revealed

  • @MrNickClark

Shares in Liberty International soared almost 10 per cent yesterday, after talks were revealed that could lead to the group merging with a major rival to create the largest shopping mall owner in the world.

The property group's share price stormed to the top of the FTSE 100 leaderboard, closing 9.23 per cent higher at 1,030p, leaving a number of short sellers nursing their losses.

The Independent revealed yesterday that high-level talks had been held over a potential move to merge Liberty with a larger international rival. A source close to the negotiations confirmed that talks had occurred but added that Liberty might not yet have been approached directly.

Today's rises will prove a headache for short sellers, who make money when the value of a stock falls but lose out when it rises. Many have targeted the property sector after huge falls in the value of stocks over the past year.

European clearing house, Euroclear, said that Liberty is one of the most shorted stocks among London's blue chips, with almost 30 per cent of its share capital out on loan. One property-focused trader, who admitted heavily shorting Liberty, said yesterday afternoon: "I'm getting murdered out here."

Liberty, which owns London's Covent Garden, is seen as a strategically attractive asset. Martin Allen, an analyst at Morgan Stanley, said in a note yesterday: "Liberty has a dominant position in the UK's regional and super-regional shopping centre market. We think the type of assets it owns and its high market share could make the company very attractive to a whole range of international investors."

The key to a potential sale is understood to be Sir Donald Gordon, the group's founder and life president. He has traditionally resisted previous merger interest. Crucially, Sir Donald, along with his family, holds a 21 per cent stake in Liberty. Yet there is talk that his attitude could have thawed since he retired as the group's chairman three years ago.

Potential suitors linked with a move for the UK-listed real estate company include Westfield Group, a shopping centre powerhouse owned by Frank Lowy, Australia's second-richest man. Westfield has targeted Liberty in the past and Mr Lowy is believed to meet Sir Donald regularly. GIC Real Estate, which holds a 5 per cent stake in Liberty and has a strategic partnership in the MetroCentre in Gateshead, has also been mooted as a potential suitor. The Takeover Panel is understood to have contacted both parties last night to ask them to clarify their position.