This article is from the Australian Property Journal archive
WESTFIELD and Westfield Retail Trust (WRT) have unveiled a surprise plan to split the Australian/New Zealand and the international businesses.
WRT will merge with Westfield’s Australian/NZ business to form a new entity, Scentre Group. While the international business will become Westfield Corporation.
The two new entities will remain listed and have separate boards and management teams.
Both groups will maintain the Westfield brand on their shopping centres. Frank Lowy will become chairman of both new entities, while current co-CEOs Steven Lowy and Peter Lowy will be co-CEO of Westfield Corporation. Peter Lowy will step down from an executive role after the transition period, expected to be about 18 months, but will remain on the board as a non-executive director.
Westfield’s current group chief financial officer, Peter Allen, will be the new CEO of Scentre Group, meaning the current WRT managing director, Domenic Panaccio, will retire from his role following the transaction.
The new Scentre Group will be internally managed with total assets of $28.5 billion comprising interests in 47 centres across Australia and NZ. The portfolio will include 15 of the top 20 centres including Westfield Sydney and Bondi Junction, generates annual retail sales of $22 billion and 555 million annual customer visits. It is currently developing $1.2 billion of projects including Miranda in Sydney and Mt Gravatt in Brisbane. Its development pipeline includes $3 billion of future projects, including Warringah in Sydney, Chermside in Brisbane and Marion in Adelaide.
The new Westfield Corporation will have a global shopping centre portfolio totalling $US17.6 billion comprising interests in 44 centres in the United States, United Kingdom and Europe with more than 8,000 retail shops, 475 million annual customer visits and $US18 billion in annual retail sales. It is currently developing Westfield World Trade Center in New York and Garden State Plaza in New Jersey, and has a future development pipeline of $US9 billion including flagship projects at Westfield London, Croydon in south London, Milan, Century City in Los Angeles and Valley Fair in San Jose.
The announcement was well received by the market, Westfield’s share price closed 42 cents higher at $10.78 yesterday, while WRT’s share price dipped 1 cent to $2.99.
Chairman Frank Lowy said Westfield’s international business and its Australian/NZ business have both grown in scale and quality to the stage where they can now stand on their own.
“They can each operate more efficiently, and generate greater growth and value for investors, by being independent. The proposal represents the latest in a series of capital restructures that have maintained the success of Westfield since it was first listed in 1960.
“Merging WDC’s Australian/NZ business with WRT will create Scentre Group, the largest REIT on the ASX, and present a retail property investment opportunity that has not existed in Australia since the 1970s before Westfield first expanded overseas. Our current structure has served us well, but we believe that this new structure will create more value for investors going forward,” he added.
The proposal has the unanimous support of the WDC board and the independent directors of the WRT board. WRT chairman, Richard Warburton AO, said the independent directors of WRT believed the proposal is in the best interests of WRT securityholders.
“Since listing in 2010 WRT has achieved a total investment return of 9.5% per annum, outperforming the ASX 200.
“While we are pleased with this investment performance the board and management of WRT have been reviewing the strategic direction of WRT, including creating its own management platform,” he said.
“We are delighted that as a result of this proposal, WRT will gain ownership of WDC’s industry leading team in Australia and New Zealand. It provides WRT the opportunity to further strengthen its portfolio and become fully integrated and self managed, thereby generating greater value potential for investors,” Warburton said.
Under the terms of the proposal, WRT securityholders will receive $285 and 918 securities in the new Scentre Group for every 1,000 WRT securities held. The cash payment will be effected through an $850 million capital return, equivalent to a pro rata buyback of WRT securities at $3.47 per security. This represents a 14% premium to its current share price and is in line with Net Tangible Assets at 30 June 2013.
Westfield securityholders will receive 1,000 securities in the new Westfield Corporation and 1,246 securities in Scentre Group for every 1,000 Westfield securities held. The proposal is expected to deliver 5.2% accretion to WRT’s Funds from Operations per security and 2.9% accretion per security for WDC, on a pro forma basis for 2014.
It is proposed that the current board of Westfield Group will become the board of the new Westfield Corporation. The board of the new Scentre Group will include current members of the WRT board.
The current managing director UK/Europe and new markets for Westfield, Michael Gutman, will become president and chief operating officer of the new Westfield Corporation, reporting to Steven Lowy.
The proposal is subject to approval by WDC and WRT security holders at meetings expected to be held in May 2014. Full implementation and separate listings are expected to commence in mid-2014.
Property Review
