By Mike Cherney in Sydney, Noemie Bisserbe in Paris and Saabira Chaudhuri in London
Westfield Corp., the Australian operator of marquee malls from
California to New York's World Trade Center, agreed to a $15.7
billion takeover offer from European shopping-center giant
Unibail-Rodamco SE.
The deal would consolidate two of the world's biggest mall
operators at a time when brick-and-mortar retailers scramble to
adapt to a tumultuous shift toward online shopping. Until recently,
the pressure has been focused on mall operators in smaller, less
well-heeled markets.
But Westfield--with is portfolio of high-end malls in
high-spending locales--has also been feeling the heat. Its shares
were down 9% this year before the disclosure of the deal
Tuesday.
Westfield has been reducing its retail exposure for years,
venturing into residential and entertainment properties. Still,
Tuesday's decision represents an acknowledgment from one of the
industry's biggest players of the formidable challenges ahead. It
could also herald more deal making, as landlords seek to add scale
and cut costs.
The transaction also caps the decadeslong career of Frank Lowy,
Westfield's chairman. A Holocaust survivor, he started in the
business with a deli in a western Sydney suburb. Mr. Lowy, who
fought in the Israeli war of independence before moving to
Australia, will retire as chairman, and his sons Peter and Steven
will step down as Westfield's co-chief executives.
The Lowys said they saw the transaction as an opportunity to
recover value for shareholders. The offer valued Westfield at an
equivalent of 10.01 Australian dollars (US$7.55) a share, a nearly
18% premium over Monday's close.
In Westfield, Unibail executives said they saw an opportunity to
boost the company's portfolio of so-called flagship centers that
tend to have more amenities, like movie theaters, and are located
in more affluent areas. Westfield competes in the U.S. with the
likes of Simon Property Group Inc., CBL & Associates Properties
Inc. and Washington Prime Group.
Unibail operates malls across Europe, including the Forum des
Halles and Les 4 Temps malls in Paris and Gropius in Berlin. The
deal will give it access to London, where Westfield operates two
big malls. Westfield and Unibail have little geographic overlap,
which could ease any antitrust issues.
The deal comes amid big changes in the retail landscape in the
U.S., and to a lesser extent Europe. More consumers are shopping
online, abandoning the malls and department stores they once
frequented. As foot traffic dries up, many brands have been closing
stores after years of flooding malls, smaller shopping centers and
strip malls with outlets. Department stores, once reliable mall
anchors, have closed hundreds of locales.
Amid that retreat, mall operators have scrambled for tenants and
novel ways to attract shoppers-- like wooing gym chains, or
creating community spaces. Retail landlords have been slashing
rents, while property owners and managers have tried to unload
assets.
Westfield in recent years had tried to stay focused on the
higher end of the market, selling off some of its lower-quality
assets in 2015. The company says 17 of its 35 malls are considered
flagship properties, comprising more than 80% of its portfolio
value. These are located in places like Century City and Culver
City in the Los Angeles area, Annapolis, Md., and the Garden State
Plaza in New York. These types of properties have been more
successful in keeping shoppers in the age of e-commerce, analysts
say.
Westfield's $1.4 billion World Trade Center mall opened last
year. The company expected brisk pedestrian traffic from tourists
and the thousands of office workers in the mixed-use complex. But
the project has faced challenges amid the choppy retail environment
and disappointing traffic.
Unibail Chief Executive Christophe Cuvillier will lead the
combined group, and the company plans to rebrand its flagship
shopping centers in Europe under the Westfield name.
The deal follows a series of big consolidation moves on both
sides of the Atlantic as industry dynamics shift. Another giant
U.S. mall owner, GGP Inc., received a $14.8 billion bid last month
from real-estate company Brookfield Property Partners LP for the
roughly two-thirds of the company it doesn't already own.
GGP owns around 125 high-end retail centers around the U.S.,
including Tysons Galleria near Washington, D.C., Glendale Galleria
outside Los Angeles and Chicago's Water Tower Place. The company
emerged from bankruptcy in 2010 with backing from Brookfield and
other investors.
Earlier this month, British shopping mall owner Hammerson PLC
agreed to acquire rival Intu Properties PLC for GBP3.4 billion
($4.53 billion), in a deal that would create a pan-European
property giant with a GBP21 billion portfolio of retail and leisure
sites.
The Lowys will remain partially involved in the combined entity.
Peter Lowy will serve on the combined company's supervisory board,
and Frank Lowy will chair a newly created advisory board. The Lowys
will also retain a $1 billion investment in the combined company, a
2.5% stake, they said.
Write to Mike Cherney at mike.cherney@wsj.com, Noemie Bisserbe
at noemie.bisserbe@wsj.com and Saabira Chaudhuri at
saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
December 12, 2017 09:12 ET (14:12 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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