Hammerson has made a dramatic U-turn on its proposed acquisition of Intu, claiming the deal is “no longer in the best interests of shareholders”.

The shopping centre owner had agreed to buy its rival in a £3.4bn deal last December, but the Hammerson board has now withdrawn its recommendation to shareholders to vote in favour of the deal.

Hammerson – itself the subject of two takeover approaches from French property giant Klepierre during the past month – said it had reconsidered the Intu deal because the stock market’s view of the UK retail property market had “deteriorated” since the start of the year.

The company said that had sparked “a disconnect between the company’s share price and the fundamental value of its business and prospects”.

It added that the market perception had been “intensified” by concerns over the “extended period of time that it would take to complete the transaction” and achieve “longer-term returns” from the acquisition.

Hammerson admitted that the volume of retail administrations and CVAs over the past five months – including New Look and Carpetright – and “subdued” consumer confidence had contributed to the “heightened level of risk associated with the UK retail property sector”.

The Hammerson board concluded that “the heightened risks associated with the Intu acquisition outweigh the long-term rewards that can be expected in comparison to other strategic options open to the company”.

Hammerson chairman David Tyler said: “After careful consideration, the board has concluded it is no longer in the best interests of shareholders to carry out the Intu acquisition.

“In recent weeks, investors have told us they share our view of the exceptional quality of our portfolio and that they have great confidence in our management team. The board has complete conviction in Hammerson’s prospects as a standalone business as we pursue our plans for future growth.”

However, Intu slammed Hammerson’s explanation as “unsatisfactory” and said it was “entirely confident” of its commercial future.

In a strongly-worded statement, Intu said Hammerson had reaffirmed its commitment to the deal as recently as March 19, in its first response to a £5bn takeover proposal by Klepierre.

Intu added that Hammerson filed a “positive” trading update just two weeks ago, while Intu itself revealed “strong trading performance” yesterday morning which it insisted underlined “the key strengths” of its business.

Intu said that, as a result, its board would be meeting to discuss Hammerson’s move and would update its shareholders “in due course”.