Real Estate Investment Trust – Shopping Malls
Unibail-Rodamco to acquire WFD for an implied value of AUD$10.01 per share
Current Price: $9.49
- Unibail-Rodamco SE and Westfield Corporation have announced that they have entered into an agreement for French based Unibail-Radamco to acquire Westfield via a Scheme of Arrangement, subject to the usual regulatory, shareholder, stock exchange and court approvals. The Westfield Board of Directors have unanimously recommended the proposed transaction, subject to a superior proposal and subject to an Independent Expert concluding that the transaction is in the best interests of WFD security holders. The Scheme is expected to be completed in the first half of 2018.
(Click on the picture above to bring up a larger image) Source: WFD Company Presentation
- Unibail-Rodamco intends to establish Chess Depository Interest (CDI’s) to be listed on the ASX which will be fully exchangeable with the new stapled securities listed in Amsterdam and Paris.
- WFD securityholders will be able to elect whether to receive the ASX listed CDI’s or overseas listed stapled securities in Unibail-Rodamco (0.01844 securities for 1 WFD security plus US$2.67 in cash). Unibail-Rodamco closed at EUR215 on Tuesday night.
- Prior to the implementation of the transaction, it is proposed that 90% of Westfield’s retail technology platform, called OneMarket, is spun-off into a newly formed ASX listed entity. This will mean that WFD holders will receive additional securities in the new entity on a pro-rata basis, which could offer some additional value as OneMarket may not have received much value recognition within the Westfield corporate structure. OneMarket will have around US$200m in cash and Steven Lowy as Chairman.
- We recommend that investors that are wanting to accept the Scheme of Arrangement (paperwork will be sent by the share registries directly to holders in due course) elect to receive the ASX listed CDI’s to avoid additional transaction costs and administration burden with dealing on an international exchange. Investors that are not wanting to receive the new securities next year can opt to sell their WFD shares on the ASX, although WFD closed at $9.49, 5.5% below the implied offer price of AUD$10.01 per security.
Created in 1968, Unibail-Rodamco SE is Europe’s largest listed commercial property company, with a presence in 11 EU countries, and a portfolio of assets valued at €42.5 billion as of June 30, 2017. As an integrated operator, investor and developer, the Group aims to cover the whole of the real estate value creation chain. With the support of its 2,000 professionals, Unibail-Rodamco applies those skills to highly specialised market segments such as large shopping centres in major European cities and large offices and convention & exhibition centres in the Paris region.
Unibail-Rodamco owns and operates 69 shopping centres, of which 56 attract more than 6 million visits per annum. These shopping centres are located in the largest and wealthiest cities in Europe, such as Paris, Madrid, Stockholm, Amsterdam, Munich, Vienna, Warsaw and Prague.
In addition to its standing assets, Unibail-Rodamco has €8.1 billion of development projects as of June 30, 2017. This pipeline includes iconic world-class retail projects such as Mall of Europe in Brussels and Überseequartier in Hamburg.
The Group distinguishes itself through its focus on the highest architectural, city planning and environmental standards. Its long term approach and sustainable vision focuses on the development or redevelopment of outstanding places to shop, work and relax. Its commitment to environmental, economic and social sustainability has been recognised by inclusion in the FTSE4Good and STOXX Global ESG Leaders indexes.
The Group is a member of the CAC 40, AEX 25 and EuroSTOXX 50 indices. It benefits from an A rating from Standard & Poor's and Fitch Ratings. Website: www.unibail-rodamco.com
Source: WFD Presentation
Important points for shareholders
- On completion of the transaction Unibail-Rodamco will be a more globally diversified business than WFD alone. 73% of WFD’s assets under management are based in the US.
- It’s expected that synergies of EUR100m per annum will be achieved through the merged group.
- Unibail-Rodamco intends to distribute between 85% to 95% of the Group’s net earnings. The company current has a dividend yield of 4.6% compared to a dividend yield of 4.0% from Westfield, before the announcement was made.
- Receipt of regulatory approvals and satisfaction of other customary closing conditions: Q2-2018
- Notice of meeting and information dispatched to Unibail-Rodamco shareholders and Westfield securityholders: Q2-2018
- Unibail-Rodamco shareholder and Westfield securityholder meetings and Australian court approval: Q2-2018
- Closing: Q2-2018.
The merger of the group appears to be generally positive for WFD holders as investors will hold securities in a more globally diversified business. The offer could flush out other potential bidders which may result in a higher offer for WFD, however as the Scheme is likely to be completed by mid 2018 there will also be some risks involved. With 65% of the Scheme to be issued in the Scrip of Unibail-Rodamco, there will be risks that its share price may decline, or the Australian dollar could rise which could result in a lower value for WFD security holders.
Shares in Australian REITS are likely to benefit in general with 35% of the Scheme of Arrangement to be distributed in cash which could be reinvested back into the new Unibail-Rodamco ASX listed CDI’s or provide an opportunity to diversify into other ASX listed REITS.