However, David Atkins, chief executive of Hammerson, said that the deal made sense for both companies. He said: “We believe a larger business controlling more of the best top quality shopping centres can provide benefits for consumers, retailers and shareholders. And I would say that thinking has accelerated with the continuing evolution in the retail market. Consumer tastes are changing rapidly, while retailers are evolving to multi-channel offerings.

“We have a good portfolio but it’s important to own the very best and being able to use our skills across a larger platform is really important going forward.”

Mr Atkins added: “It was the right time from their point of view, from a pricing point of view, from a relationship point of view, but strategically I think this is absolutely the right step for Hammerson to take now.”

Hammerson shareholders will own 55 per cent of the group with the rest owned by Intu investors, who will receive 0.475 of a new Hammerson share for each Intu share they own. The offer from the FTSE 100 group amounts to a value of 254p per Intu share.

Shares in Hammerson were 3.5 per cent lower at 515.56p in late afternoon trading in London. Intu shares were nearly 14 per cent higher at 226½p.

Robert Duncan of stockbroker Numis said: “This looks like an opportunistic attempt to get its (Hammerson‘s) hands on Intu’s portfolio which it believes it will be able to operate and manage more effectively than the incumbent owner.”

Hammerson’s market value is around £4 billion, giving the combined group a value of around £7.3 billion. This compares with Land Securities at £6.96 billion and British Land at £6.4 billion.

Following completion of the deal the new company will dispose of property worth at least £2 billion “to strengthen its balance sheet and provide liquidity to reinvest in higher return opportunities”.

Mr Atkins and Timon Drakesmith, Hammerson’s finance director, will remain in place. David Tyler, the chairman of Hammerson, will be the chairman of the enlarged group. John Whittaker, deputy chairman of Intu, will become deputy chairman of the enlarged group. John Strachan, chairman of Intu, will join the board as senior independent director.

Rumours circulating this morning that Mr Whittaker, who owns 30 per cent of Intu, proposed the deal after Intu dropped out of the FTSE 100 this year, were dismissed by Mr Atkins. The Hammerson chief executive said that he came up with the idea while talking with Mr Strachan over a drink this summer.

He added: “We knew John [Whittaker] was supportive, as that was obviously going to be important. But the confirmation came through the Intu board. I have only had two meetings with John Whittaker over the last few months.”

The board of the new group will comprise six directors nominated by Hammerson and four directors nominated by Intu. There is no role for David Fischel, the chief executive of Intu. Mr Fischel joined Intu in 1985, he became finance director in 1988 and chief executive in March 2001.

The company expects to make cost savings of £25 million a year by the end of the second year after completing the deal. It expects to take a one-off integration cost of £40 million.

Hammerson is a real estate investment trust, or Reit, which is a type of company that enables investors to pool their capital to invest in property and real estate without having to buy property directly. They have special tax status in the UK which requires them to pay out at least 90 per cent of their income at dividends. For investors the income is treated as property rental income rather than dividends.