The $US24.7 billion ($32.8bn) friendly takeover of mall landlord Westfield Group by European shopping centre giant Unibail-Rodamco will create the “world’s best in class” retail real estate empire, according to property tycoon Sir Frank Lowy.
The new company will own shopping centres in global cities from London and Paris to New York and Los Angeles as well as a combined development pipeline of €12.3bn across Europe and the US. Unibail-Rodamco will emerge as a global property behemoth controling 104 malls in 27 retail markets around the world.
Sir Frank last night said the mega-mall deal was a good deal for shareholders and he remained a strong believer in the prospects of the world’s top malls, despite online retailers playing havoc with the sector and valuations.
In a new record for an Australian takeover, Unibail-Rodamco is offering a combination of cash and scrip valuing each Westfield share at $US7.55, or $10.01, a 17.8 per cent premium to Westfield’s Monday share price.
The takeover, foreshadowed online by The Australian yesterday, has been unanimously backed by the boards of Westfield and Unibail-Rodamco.
Westfield shares were placed in a trading halt yesterday ahead of the transaction at $8.50, valuing the company at $17.66bn and Sir Frank’s 9.5 per cent stake at $1.68bn.
Sir Frank, after six decade career as a shopping centre magnate, will retire as chairman of Westfield and chair a newly created advisory board of the merged company, while two Westfield board members, including his son, co-chief executive Peter Lowy, will be appointed to the supervisory board of the new entity.
However, the deal marks the end of an era for the famed Lowy family’s involvement in building a global empire. Following the deal, both Lowy sons Peter and Steven plan to retire as co-chief executives of Westfield and join their father and brother David in running their private investment empire.
The combined retail group will have gross market value of €61.1bn ($95bn), 84 per cent of which is in flagship shopping destinations.
In a sign that they remain strong believers in the future of world class retail centres, the Lowy family said it intended to maintain a substantial investment in the combined group and was committed to its success.
Sir Frank said the deal was “the culmination of the strategic journey Westfield has been on since its 2014 restructure” when it hived its Australasian malls into the Scentre Group. “We see this transaction as highly compelling for Westfield’s securityholders and Unibail-Rodamco’s shareholders alike,” he said.
Sir Frank laid out a vision where the Westfield name would grow and become a part of the best malls around the world.
“Unibail-Rodamco’s track record makes it the natural home for the legacy of Westfield’s brand and business,” he said last night.
“We look forward to seeing Westfield continue to grow as part of the world’s premier owner of flagship shopping destinations.”
The offer comprises 0.01844 of the Paris-listed Unibail-Rodamco securities plus $US2.67 in cash for each Westfield security. Some analysts were quick to note the scrip-heavy nature of the bid.
But there is strong crossholdings by large institutions between the pair that are likely to be supportive, while retail investors may keep an exposure to the group as the new entity will be jointly listed in Amsterdam and Paris, with a secondary listing via CHESS Depositary Interest on the ASX.
Westfield said it was not worried by the threat posed by online retailer Amazon, with Steven Lowy saying the group had adapted its malls to changing consumer behaviour.
“Unibail-Rodamco has done the same to their portfolio. It really creates an opportunity that is incredible robust and will definitely be able to adapt to the changes in society that are taking place, Amazon or no Amazon,” he said.
Unibail-Rodamco chairman and chief executive Christophe Cuvillier, who will remain as group chief executive after the deal, said last night the group had “immense respect” for the accomplishments of the Lowy family and the Westfield team.
“The acquisition of Westfield is a natural extension of Unibail-Rodamco’s strategy of concentration, differentiation and innovation,” Mr Cuvillier said.
“It adds a number of new attractive retail markets in London and the wealthiest catchment areas in the United States. It provides a unique platform of superior quality shopping destinations supported by experienced professionals of both Unibail-Rodamco and Westfield.”
The Lowy family has agreed not to sell its $2 billion stake in Westfield during the deal and to vote in favour of the takeover in the absence of the Westfield board recommending a better offer.
The French-headquartered Rodamco expects run-rate cost savings of €100 million a year and predicts the deal to be accretive to earnings per share. The deal is subject to approval by shareholders of both groups and Australian court approval and is set to close in the first half of 2018.
Deutsche Bank and Goldman Sachs are providing a €6.1bn committed acquisition financing facility to cover the cash part of the takeover, refinancing requirements and transaction costs.
As flagged by The Australian’s DataRoom column, Deutsche Bank and Goldman Sachs are financial advisers to Unibail-Rodamco, while Rothschild is acting as lead financial adviser to Westfield and UBS and Jefferies are joint financial advisers.
The Lowy family will have a stake of about 2.5 per cent, worth about $US1bn, in the new company. Sir Frank is the fourth-richest person in Australia with wealth of $8.26bn, according to this year’s rich list.
The 87-year-old was last week recognised for his contribution to the British economy in a knighthood ceremony at Windsor Castle.
Unibail-Rodamco has been interested in buying Westfield for several years. The Australian group owns 35 malls worth $32bn across the US and Britain.
Sir Frank said yesterday was second most important day, after the group’s listing in 1960. The negotiations took about six weeks and the bid was a “very good price” for shareholders, Sir Frank said.
Peter Lowy added that the stock — like retailers all over the world — had been trading at a significant discount to underlying value over the past 12 months but the deal would make up the gap.
Westfield was trading at $8.94 a year ago and fell as low as $7.35 this August. But Westfield had spent the years since the GFC repositioning itself and its asset base.
Additional reporting: Elizabeth Redman