Shopping centre owner Hammerson, which owns the Victoria Gate development in Leeds, has agreed an all share takeover of rival Intu in a £3.4bn deal that will create Britain's biggest property company.
The deal will create a £21bn shopping centre giant.
Victoria Gate, which opened in October 2016, forms part of the 53,400 square meter Victoria Leeds shopping destination.
Anchored by John Lewis’s first store in the city, the arcades are also home to a range of premium brands including Anthropologie, GANT, Hackett, Joules, Aspinal of London, CAU, Le Pain Quotidien and international restaurant group D&D. Over 75 per cent of the brands at Victoria Gate are new to the city.
Hammerson also owns Victoria Quarter, which forms the other part of Victoria Leeds. The Grade II listed building was bought by Hammerson in 2012 and the 160,000 sq ft scheme is set over two distinct shopping streets - County Arcade and Queen Victoria Street.
Hammerson said Leeds has an affluent population and a prominent position as the principal shopping destination in Yorkshire. It said there is a big opportunity to capture growing consumer demand throughout the region by bringing new brands to the city. The Victoria Quarter scheme is anchored by Harvey Nichols and includes brands such as Louis Vuitton, Michael Kors, Vivienne Westwood and Reiss.
Intu has yet to make inroads into Yorkshire but is best known for the Arndale Centre and the Trafford Centre, both in Manchester, and Lakeside Shopping Centre in Essex.
Hammerson's chief executive David Atkins said that as part of the tie-up, the new group will offload at least £2bn worth of shopping centre assets, primarily in the UK.
It comes at a time when consumer confidence has taken a pounding, resulting in a sharp decline in retail sales.
Hammerson plans to target high growth markets in Europe such as Spain and Ireland.
Mr Atkins described the UK retail market as challenging and said that there is a polarisation between the best and worst shopping centres.
The group also plans to cut costs by £25m a year.
The combined group will be led by Mr Atkins and Hammerson chairman David Tyler.
Shareholders will vote on the deal next year, with Intu having already secured more than 50 per cent of investor support for the all-paper deal.
Mr Tyler said: "This transaction will deliver real value for shareholders.
"The financial strength of the enlarged group and its strong leadership team will make it well-placed to take advantage of higher growth opportunities on a pan-European scale."
Jasper Lawler, head of research at London Capital Group, said: "Intu shares were down over 25 per cent year to date before the announcement so it's an opportunistic buy.
"Intu share price losses have accelerated on signs British shoppers are tightening purse strings. The cost of living squeeze on UK consumers from higher inflation is forcing companies like Hammerson and Intu into action.
"Online shopping means shopping centres and high street shopping are in a long-term malaise. Shareholders will want to see assets sold down in the merged company to help fund the deal and to reflect the lower demand for brick and mortar stores."
The acquisition will result in Hammerson shareholders owning 55 per cent of the combined firm and Intu investors the remainder.
Mr Atkins saidd: "This marks an exciting milestone in the history of Hammerson.
"The acquisition creates a leading pan-European platform of desirable retail and leisure destinations which are better positioned to serve the needs of our retailers, excite our customers and support our partners and communities."