Shopping centre owner Hammerson has agreed a £3.4bn takeover of rival Intu, in a deal that will create the UK’s biggest property company, worth £21bn. The Hammerson Intu merger will bring together big shopping centres across the country including London’s Brent Cross, the Birmingham Bullring and Manchester’s Trafford Centre.

The combined group, which will retain the Hammerson name, already has plans to focus on Spain and Ireland, where the retail sector is growing at a fast pace.

At least £2bn of leisure and retail properties will be disposed of “to strengthen its [Hammerson’s] balance sheet and provide liquidity to reinvest in higher return opportunities”.

Shares in Intu jumped by almost 19 percent after the tie-up was announced, while Hammerson shares dropped by 3 percent.

Hammerson shareholders will own 55 percent of the combined company and Intu investors will own the rest.

John Strachan, chairman of Intu, said:

Intu offers high-quality retail and leisure destinations in the UK and Spain, which, when merged with Hammerson’s own top-quality assets in the UK, in France and in Ireland, present a highly attractive proposition for retailers and shoppers in Europe’s leading cities.

Hammerson chairman David 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.

The combined group will be chaired by Tyler and led by Hammerson chief executive David Atkins.

Billionaire John Whittaker, who heads up Intu’s owner Peer Holdings will become deputy chairman of Hammerson after the takeover.

Russ Mould, AJ Bell investment director, said Hammerson’s takeover of Intu was “dramatic, given how terribly Intu’s shares have down this year, amid fears over not just what Brexit may do to consumer confidence but also the fate of bricks-and-mortar retailers at the hands of Amazon and other online rivals”.

GlobalData retail analyst Sofie Willmott said the deal would give the combined group a stake in 12 of the 20 biggest malls in the UK measuring more than 20m sq ft that attract more than 20m customers a year.

Shareholders will vote on the deal next year.