WESTFIELD GROUP TO RESTRUCTURE – WESTFIELD RETAIL TRUST TO MERGE
4 December 2013
Westfield Group (ASX: WDC) and Westfield Retail Trust (ASX: WRT) today announced a proposal to merge WDC’s Australian/NZ business with WRT to form a new entity to be known as Scentre Group. The international business of WDC will become Westfield Corporation.
The two new entities will be listed on the ASX and have separate boards and management teams. Both groups will maintain the Westfield brand on their shopping centres.
Mr Frank Lowy AC, Chairman of Westfield Group, will become Chairman of both new entities.
“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,” Mr Lowy said.
“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”.
Under the new structure, Scentre Group will be internally managed and benefit from the skills and experience of the Westfield management team. Its scale and quality will be attractive to investors as a proxy for investing in Australian retail real estate. It will have significant scope to increase long term returns through its development pipeline and the opportunities to joint venture its wholly owned assets.
Westfield Corporation, with its international portfolio of iconic assets in major world cities, presents a unique investment opportunity for investors. Its development pipeline will represent a greater proportion of assets than under the current structure, thereby leading to improved returns on invested capital. With its international focus, Westfield Corporation should be better able to be compared by investors to its international peer group.
Mr Frank Lowy said, “Both companies are large and strong enough to operate independently of each other and this proposal allows them to pursue their individual strategic goals and financing plans.
“The proposal provides investors with a clear choice as to what they invest in, both in terms of geographic and currency exposure”.
The proposal has the unanimous support of the WDC board and the independent directors of the WRT board.
The Chairman of WRT, Mr 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.”
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.
WDC securityholders will receive 1,000 securities in the new Westfield Corporation and 1,246 securities in Scentre Group for every 1,000 WDC securities held.
The proposal is expected to deliver 5.2% accretion to WRT’s Funds from Operations (FFO) per security and 2.9% accretion per security for WDC, on a pro forma basis for 2014.
The new Scentre Group will be the pre-eminent internally managed Australian/NZ-focussed shopping centre REIT with total assets of $28.5 billion comprising interests in 47 centres. The portfolio, which will include 15 of the top 20 centres in Australia 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. Scentre Group’s Australian/NZ portfolio will continue to be branded “Westfield”.
The new Westfield Corporation will be a leading global shopping centre company focused on owning, developing and operating iconic shopping centres in major world cities. It will have total assets of US$17.6 billion comprising interests in 44 centres in the US/UK/Europe with more than 8,000 retail shops, 475 million annual customer visits and US$18 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 US$9 billion including flagship projects at Westfield London, Croydon in south London, Milan, Century City in Los Angeles and Valley Fair in San Jose. Westfield Corporation will also continue to identify further opportunities to expand in existing and new markets around the world.
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. This will provide experience, continuity and stability during the transition to the new structure and beyond.
Current co-Chief Executive Officers of Westfield Group, Mr Steven Lowy AM and Mr Peter Lowy will be co-Chief Executives 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.
The current Managing Director UK/Europe and New Markets for Westfield Group, Mr Michael Gutman, will become President and Chief Operating Officer of the new Westfield Corporation, reporting to Steven Lowy.
Current Group Chief Financial Officer of Westfield Group, Mr Peter Allen, will be Chief Executive Officer of Scentre Group.
The Managing Director of Australia/NZ/US for Westfield Group, Mr Bob Jordan, will step back from his role once the transaction has completed, expected to be in mid-2014.
“Bob has made an enormous contribution to the success of Westfield for the past 27 years,” Mr Frank Lowy said. “He has been one of our most senior executives throughout most of that period and played a huge role in the growth of the company.”
Mr Warburton said the current WRT Managing Director, Mr Domenic Panaccio, will retire from his role following implementation of the transaction.
“Domenic has been instrumental in developing a solid platform for WRT that has positioned the business very well for the future and I thank him for his strong leadership and contribution since the establishment of WRT,” he said.
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.
Further information, including an investor presentation, is available at westfield.com/corporate and westfieldretailtrust.com
Investor Line (free call): 1800 674 015
For callers outside Australia: +61 3 9415 4121
This release contains forward-looking statements, including statements regarding future earnings and distributions. These forward-looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this release. You should not place undue reliance on these forward-looking statements. These forward-looking statements are based on information available to us as of the date of this presentation. Except as required by law or regulation (including the ASX Listing Rules) we undertake no obligation to update these forward-looking statements.
The Westfield Group (ASX Code: WDC) is an internally managed, vertically integrated, shopping centre group undertaking ownership, development, design, construction, funds/asset management, property management, leasing and marketing activities and employing approximately 4,000 staff worldwide. The Westfield Group has interests in and operates one of the world’s largest shopping centre portfolios with investment interests in 91 shopping centres across Australia, the United States, the United Kingdom and New Zealand, encompassing over 20,500 retail outlets and total assets under management of A$65.8bn.
About Westfield Retail Trust
Westfield Retail Trust (ASX Code: WRT) is Australia’s largest listed real estate investment trust solely focused on Australian and New Zealand retail property, with total assets valued at approximately $13.8 billion at 30 June 2013. The Trust’s principal investment is the joint venture ownership, alongside Westfield Group, in a high quality shopping centre portfolio comprising interests in 46 major shopping centres located predominantly in Australia with 9% of the Trust’s shopping centre assets located in New Zealand.