Matthew Cranston, Nick Lenaghan and Anthony Macdonald
Sir Frank Lowy has agreed to sell his global shopping empire, Westfield Corporation for $32 billion to European giant Unibail-Rodamco as landlords around the world bulk up against the rise of online shopping.
In what would be Australia’s biggest takeover, the deal, first revealed by Street Talk, will create a $95 billion global retail giant with shopping centres spanning major cities in 13 countries.
“It’s a day of mixed emotion but I am 100 per cent comfortable with the decision,” Sir Frank said from London via telecast at an after-market press conference convened in Sydney.
“We will move from being executives to investors.
“I have spent my life building these assets and I could not imagine a better home for them.”
Sir Frank said the deal was the culmination of the path Westfield has taken since it was restructured three years ago, creating two listed trusts including Scentre which owns and operates Westfield malls in Australia.
“We look forward to seeing Westfield continue to grow as part of the world’s premier owner of flagship shopping destinations.”
The agreement with Unibail-Rodamco will see the progressive rollout of the well-recognised Westfield brand in the enlarged group’s flagship shopping destinations.
Lowy’s Westfield has recommended a scrip and cash bid valuing the company at $10.01 a share, a 17.8 per cent premium to the company’s last traded price in Australia, valuing the company at more than $32 billion including debt.
The effect of the deal on locally listed property trust was immediate, with retail landlords including Scentre,and Vicinity Centres closing higher.
Equity released by the Westfield deal is expected to flow back into local trusts, which have been weighed down for much of this year by the spectre of Amazon and the rise of e-commerce.
But Sir Frank has already dealt with that bogey, effectively Amazon-proofing his portfolio by switching investment into flagship trophy malls, such as the Westfield World Trade Center in New York.
The deal would see Unibail-Rodamco list securities on the Australian Securities Exchange, through so-called Chess Depositary Interests.
Westfield security holders will be able to choose whether to receive the scrip in Unibail-Rodamco stapled securities or the group’s CDIs trading locally.
The French giant is offering Westfield unitholders 0.01844 Unibail-Rodamco shares for every Westfield share, and $US2.67 cash.
The transaction values the Lowy family’s stake at $1.976 billion. Based on the structure of the deal, the family would receive about $692 million in cash and $1.284 billion in Unibail-Rodamco securities.
The Lowy family has pledged to maintain a “substantial” investment in the European giant.
Sir Frank is expected to take an honorary chairman’s role at the combined group, while Westfield co-chief executive Peter Lowy will take a seat on Unibail-Rodamco’s board.
Lowy, the company’s founder, chairman and largest shareholder, said he planned to accept the offer.
The mega-deal comes as the crowning achievement in a retail property empire that began with a Blacktown mall in 1959, with Westfield floated the following year.
The Lowys still retain a small stake in Scentre, the operator of Westfields malls in Australia, which is not part of the deal
Paris-based Unibail-Rodamco is the biggest commercial property landlord in Europe, while Westfield owns properties across the United States and in London.
“All of us at Unibail-Rodamco have immense respect for what the Lowy family and the Westfield team have accomplished with the Westfield brand and the company’s iconic collection of world class shopping destinations,” said Unibail-Rodamco chief executive Christophe Cuvillier.
The acquisition of Westfield was a “natural extension” of the French giant’s strategy of “concentration, differentiation and innovation”, he said.
When completed as expected, Unibail-Rodamco will have a portfolio of 104 prime assets across 13 countries. It will have assets in prime retail destinations in London, Los Angeles, Munich, New York, Paris, Stockholm, Vienna, Madrid and Warsaw, among other cities.
“It adds a number of new attractive retail markets in London and the wealthiest catchment areas in the United States,” Mr Cuvillier said.
“It provides a unique platform of superior quality shopping destinations supported by experienced professionals of both Unibail-Rodamco and Westfield.
“We believe that this transaction represents a compelling opportunity for both companies to realise benefits not available to each company on a standalone basis, and creates a strong and attractive platform for future growth.”
Unibail-Rodamco has been selling smaller and less dominant assets in its European retail portfolio and reinvesting the proceeds in its development pipeline, which includes larger malls that are expected to be more resilient to the growth of online shopping. The company has €8.1 billion of planned projects, according to its website. The company was preparing to sell a pair of shopping centres in the Netherlands for $660 million it was reported in September.
Westfield’s retail technology platform will be spun-off from Westfield into a newly formed ASX-listed entity.
Rothschild and UBS advised Westfield, while Goldman Sachs and Deutsche Bank advised the bidder.
Westfield will put the deal to a shareholder vote next year, as part of a scheme of arrangement.
‘Very good outcome’
The transaction won immediate endorsement from BT Investment Management’s Pete Davidson, who holds Westfield stock as the fund manager’s largest overweight investment.
“We are delighted with this transaction. It’s a very good outcome,” he said.
“It validates Westfield’s strategy of pursuing high quality malls in the best locations and the market has recognised that in this Unibail-Rodamco takeover.”
In other signs of consolidation in the industry, Brookfield Asset Management Inc. is seeking to buy the portion of mall owner GGP Inc. it doesn’t already own. New York-based hedge fund Third Point is pushing for change at Macerich Co., including a possible sale, after building a stake in the real estate investment trust, people familiar with the matter said last month. Simon Property Group, the biggest US mall owner, has fallen 8.7 per cent this year. Even after getting a boost from Brookfield’s interest, GGP shares are down 6.4 per cent since the beginning of the year.
Britain’s biggest publicly traded mall owners are also combining forces. Hammerson this month agreed to buy its smaller competitor, Intu Properties, in a deal that values the latter at about £3.4 billion ($4.6 billion).