EU Property Giant Bets $16-B on US Shopping Malls
$UNRDY, $WFGPY, $AMZN
Europe’s biggest property firm Unibail-Rodamco (OTCMKT:UNRDY) is to buy US and UK mall operator Westfield Corp. (OTCMKT:WFGPY) for $16-B, a defensive move to create a global leader in a sector grappling with the online shopping challenge led by Amazon (NASDAQ:AMZN).
The transaction gives Europe-focused Unibail, which owns Les 4 Temps and Forum des Halles in Paris and has centers spreading from Helsinki to Valencia, exposure to the United States and Britain, where Westfield operates 35 malls, including landmark premises in London.
Under its Australian billionaire Chairman and co-Founder Frank Lowy, Westfield has pioneered US mall redevelopment, introducing upscale food courts, high-end restaurants, bars, cinemas and boutique fashion outlets to entice shoppers.
Talks to seal a deal had taken just 6 weeks, said Mr. Lowy whose family will no longer run the company he set up in Y 1960 but will end up with a 2.8% stake in the combined group.
Mr. Lowy said it made sense to sell because Unibail offered a “very good price,” but acknowledged that the sale partly reflected global consolidation and the pressure on retailers.
A tough consumer spending environment and intense competition from online rivals has made retailers more selective with their expansion plans, making life tough for shopping center operators and driving consolidation in the sector.
Unibail’s move creates a global leader with $72-B of gross market value in 27 retail markets under the distinctive red Westfield logo.
Around 37% of the combined entity’s portfolio would be in France and 22% in the United States.
“Westfield is the best fit for us and a natural extension of our strategy,” Unibail’s CEO Christopher Cuvillier said following the announcement of the proposed deal, which would be worth $24.7-B including debt.
Under the terms of the deal, Westfield shareholders would receive cash and shares totaling $7.55, or A$10.01, an 18% premium per share. The shares were halted earlier on Tuesday pending the announcement, having last traded at A$8.50.
Shares in Unibail-Rodamco, which was formed in Y 2007 by the merger of France’s Unibail and Dutch-based Rodamco, were down 4% at 1500 GMT.
Shopping center owners are working to reinvent themselves to keep up with rapid changes in consumer behavior, with the expansion of e-Commerce giant Amazon.com 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. (NYSE:M) 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.
The Lowy Family, which owns 9% of Westfield, said they would rather be investors than executives after putting in a combined 145 years at the company, which has stakes in 18 suburban US shopping centers, 3 of which it wholly owns.
Deutsche Bank and Goldman Sachs have committed to provide EUR 6.1-B in funding to cover the cash portion of the offer.
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