Unibail buys Westfield for A$21b in mall deal

[SYDNEY] Unibail-Rodamco SE, Europe's largest commercial landlord, agreed to buy Australia's Westfield Corp for about A$21 billion (S$21.4 billion) in the biggest property acquisition since 2013 as declining store sales push mall operators worldwide to merge.

The Paris-based company offered a combination of cash and stock, valuing Westfield at A$10.01 per share, or about 18 per cent more than Monday's closing price, according to a statement Tuesday. The offer has been unanimously recommended by Westfield's board.

Unibail is mounting the biggest takeover of a company in the Asia-Pacific region this year - and the largest ever in Australia - as mall owners seek to contend with relentless pressure from online commerce. Shares of such companies have been hit hard and store closures are accelerating, pressuring landlords to fill empty space and reinvent shopping centers.

Founded by billionaire Frank Lowy, Westfield began in 1959 with one shopping mall in the outer suburbs of Sydney and has grown to become one of the world's largest shopping center owners and managers. Westfield owns and operates 35 malls in the US and UK valued at US$32 billion, according to its website.

Westfield's properties include the Shepherd's Bush shopping center in London and the retail space in New York's World Trade Center. It gets almost 70 per cent of its US$1.8 billion annual revenue in the US, where companies are trying to re-purpose struggling brick-and-mortar shopping centers.

"Assets I've spent my life building, I could not imagine a better home for them than in this new company," Frank Lowy said via a webcast from London. Lowy will chair a newly created advisory board, and the Lowy family will maintain a substantial investment in the group, according to the statement.

The transaction implies an enterprise value of US$24.7 billion, according to the statement. Unibail offered 0.01844 of its shares plus US$2.67 in cash for each Westfield security, representing a 65 per cent stock to 35 per cent cash split, according to the statement.

Unibail-Rodamco has been selling smaller and less dominant assets in its European retail portfolio and reinvesting the proceeds in its development pipeline which includes larger malls which are expected to be more resilient to the growth of online shopping. The company has 8.1 billion euros (S$12.9 billion) of planned projects, according to its website. The company was preparing to sell a pair of shopping centers in the Netherlands for $660 million, Bloomberg reported in September.

Shares of Westfield have declined 9.4 per cent this year, headed for their worst performance since 2011. The shares were suspended Tuesday ahead of the announcement. Unibail-Rodamco shares have fallen 1.2 per cent.

In other signs of consolidation in the industry, Brookfield Asset Management Inc. is seeking to buy the portion of mall owner GGP Inc. it doesn't already own. New York-based hedge fund Third Point is pushing for change at Macerich Co., including a possible sale, after building a stake in the real estate investment trust, people familiar with the matter said last month. Simon Property Group Inc, the biggest U.S. mall owner, has fallen 8.7 per cent this year. Even after getting a boost from Brookfield's interest, GGP shares are down 6.4 per cent since the beginning of the year.

UK's biggest publicly traded mall owners are also combining forces. Hammerson Plc this month agreed to buy its smaller competitor, Intu Properties Plc, in a deal that values the latter at about £3.4 billion (S$6.13 billion).

BLOOMBERG