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December 13, 2017

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Europe group buys Westfield in biggest takeover of Aussie firm

UNIBAIL-RODAMCO, Europe’s biggest property group, has agreed to buy shopping mall owner Westfield Corp for US$16 billion, marking the biggest takeover of an Australian company and a shift in global retail property to counter online shopping.

The sector is grappling with challenges from online retailers led by Inc and the deal, which Westfield said was “highly compelling” for shareholders, follows world No. 2 retail real estate investment trust GGP’s rejection of Brookfield Property’s bid.

“Unibail-Rodamco’s track record makes it the natural home for the legacy of Westfield’s brand and business,” said Westfield chairman Frank Lowy, a holocaust survivor who has become a billionaire since he co-founded the group in 1960.

The deal gives the European group exposure to the United States and Britain, where Westfield owns and operates 35 shopping centers including in London. It has been a pioneer in US mall redevelopment, melding traditional mall retailers with atypical mall fixtures like upscale food courts, high-end restaurants, bars, cinemas and boutique fashion outlets.

Unibail-Rodamco, which is heavily exposed to the eurozone and focused on large sites with heavy footfall and high-profile tenants such as Apple, Zara and Primark, said Westfield shareholders would receive cash and shares totaling A$10.01 (US$7.55), an 18 percent premium per share.

Shares in Westfield were halted earlier yesterday pending the announcement, having last traded at A$8.50.

“With a A$10 handle in front, the offer doesn’t look bad,” Sydney-based CLSA analyst Sholto Maconochie said, adding the deal would “create the leading mall operator globally.”

“Westfield is the best fit for us and a natural extension of our strategy,” Unibail’s chief executive Christopher Cuvillier said on an analyst call following the announcement of the deal, which would be worth US$24.7 billion including debt.

Unibail-Rodamco, formed in 2007 by the merger of France’s Unibail and Dutch-based Rodamco, said it would rebadge its malls with the red Westfield logo and would create a global leader with US$72 billion of gross market value in 27 retail markets.

Deutsche Bank and Goldman Sachs have provided 6.1 billion euros (US$7.2 billion) in funding to cover the cash portion of the offer, Unibail said.

Shopping center owners are scrambling to reinvent themselves to keep up with rapid changes in consumer behavior, with the expansion of e-commerce giant coinciding with an explosion in online purchases, while consumers increasingly treat malls as places for socializing and window shopping.

Once dominant United States department store operators such as Macy’s Inc and J C Penney Co Inc have announced plans to shut hundreds of stores in recent years, putting pressure on landlords to find new “anchor tenants” or come up with new ways to grow returns.

“Westfield has got assets in the UK and in the US that are all in mature Amazon markets. They’re already 50 percent through that online retail switch,” Morningstar analyst Tony Sherlock said of the deal.

Lowy, who said talks to seal a deal had taken just six weeks and expressed “mixed emotions” about the sale, will retire as chairman and his sons Steven and Peter, will retire as co-CEOs.


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