European mall owner Unibail-Rodamco SE has entered into an agreement to buy Westfield Corp, the northern hemisphere part of the former Westfield Group which has interests in 35 shopping centres in the US & the UK and total assets under management of $US32 billion.
The announcement was made yesterday in Sydney, Amsterdam & Paris. The transaction requires the approval of shareholders in both groups and is expected to close in the first half of 2018.
When Westfield split in 2014, the Australia-New Zealand part of it went into SCentre Group Ltd. That’s outside this deal.
Sir Frank Lowy AC, who’s 87 and cofounded Westfield in 1960, will retire as chair of Westfield and his sons Peter & Steven Lowy will retire as co-chief executives, but will retain other roles. The group will have its headquarters in Paris & Schiphol (Netherlands), and 2 regional headquarters in Los Angeles & London.
On completion, existing Unibail-Rodamco shareholders are expected to hold about 72% of the group’s stapled securities and Westfield securityholders- including Lowy family interests – will hold about 28%.
Unibail-Rodamco & a newly created Dutch real estate investment trust (reit) holding Westfield’s US operations will become stapled entities. The group intends to establish Chess depositary interest listed on the Australian Securities Exchange, which will be fully exchangeable with the new group’s stapled securities listed in Amsterdam & Paris. Westfield securityholders will be able to elect whether to receive the scrip consideration in Unibail-Rodamco stapled securities or the group’s CDIs.
$US72 billion portfolio
The transaction implies an enterprise value for Westfield of $US24.7 billion, and a total value of $US7.55 (or $A10.01)/Westfield security based on UnibailRodamco’s closing price of €224.10 on Monday, representing a 17.8% premium based on Westfield’s closing security price of $US6.41 ($A8.50) on Monday, and a 22.7% premium based on Westfield’s volume-weighted average closing security price of $US6.1516 over the last 3 months. 38.7 million Unibail-Rodamco stapled securities will be issued to Westfield securityholders to fund the scrip consideration and $US5.6 billion will be paid as the cash consideration, resulting in a 65% stock, 35% cash consideration mix.
The enlarged Unibail-Rodamco will own & operate a portfolio with a total gross merchandise value of over €61.1 billion ($US72.2 billion) and a pro forma proportionate net rental income of €2.3 billion ($US2.6 billion) for the 12 months to 30 June 2017. The shopping centre portfolio will represent 87% of the pro forma group’s gross merchandise value alongside Unibail-Rodamco’s existing office (7%) and convention & exhibition (6%) portfolios, both located in Paris.
Unibail-Rodamco, created in 1968, is Europe’s largest listed commercial property company, with a presence in 11 EU countries and a portfolio of assets valued at €42.5 billion as of 30 June 2017. It owns & operates 69 shopping centres and has €8.1 billion of development projects, including Mall of Europe in Brussels & Überseequartier in Hamburg.
Commenting on the transaction, Sir Frank Lowy said it was “the culmination of the strategic journey Westfield has been on since its 2014 restructure. We see this transaction as highly compelling for Westfield’s securityholders & Unibail-Rodamco’s shareholders alike. Unibail-Rodamco’s track record makes it the natural home for the legacy of Westfield’s brand & business. We look forward to seeing Westfield continue to grow as part of the world’s premier owner of flagship shopping destinations.”
Future control structure
Unibail-Rodamco will maintain its 2-tier board structure – a supervisory board & a management board. Colin Dyer, who retired as president & chief executive of real estate consultancy JLL in October 2016, will continue to chair the supervisory board. 2 Westfield board members, including Peter Lowy, will join it. A newly created advisory board, to be chaired by Sir Frank Lowy, will provide the group with independent advice from outside experts on its strategy.
The management board will consist of group chief executive Christophe Cuvillier & group chief financial officer Jaap Tonckens. The senior management committee will include top executives of both Westfield & Unibail-Rodamco.
Steven Lowy will chair the board of OneMarket (formerly Westfield Retail Solutions) when a 90% interest in Westfield’s retail technology platform is spun off into a newly formed ASX-listed entity. The Unibail-Rodamco Group will retain the remaining 10% interest. OneMarket will have $US200 million in cash at 31 December.
Attribution: Joint release.