Europe’s biggest property firm Unibail-Rodamco is to buy US and UK mall operator Westfield Corp. for US$16 billion.
The deal is seen as a defensive move to create a global leader in a sector grappling with the online shopping challenge led by Amazon, Reuters reports.
It gives Europe-focused Unibail, which owns Les 4 Temps and Forum des Halles in Paris and has centers spreading from Helsinki to Valencia, exposure to the United States and Britain, where Westfield operates 35 malls, including landmark premises in London, the news agency said.
Under its Australian billionaire chairman and co-founder Frank Lowy, Westfield has pioneered in US mall redevelopment, introducing upscale food courts, high-end restaurants, bars, cinemas and boutique fashion outlets to entice shoppers.
Talks to seal a deal had taken just six weeks, said Lowy whose family will no longer run the company he set up in 1960 but will end up with a 2.8 percent stake in the combined group.
Lowy said it made sense to sell because Unibail offered a “very good price”, but acknowledged that the sale partly reflected global consolidation and the pressure on retailers.
A tough consumer spending environment and intense competition from online rivals have made retailers more selective with their expansion plans, making life tough for shopping center operators and driving consolidation in the sector.
Unibail’s move dwarfs British shopping center owner Hammerson’s purchase of smaller rival Intu Properties for some 3.4 billion pounds (US$4.53 billion), creating a global leader with US$72 billion of gross market value in 27 retail markets under the distinctive red Westfield logo.
Around 37 percent of the combined entity’s portfolio would be in France and 22 percent in the United States.
“Westfield is the best fit for us and a natural extension of our strategy,” Unibail’s chief executive Christopher Cuvillier said following the announcement of the proposed deal, which would be worth US$24.7 billion including debt.
Unibail is focused on large sites with heavy pedestrian traffic and high-profile tenants such as Apple, Zara and Primark and analysts said it would gain from importing the Westfield model.
Under the terms of the deal, Westfield shareholders would receive cash and shares totaling US$7.55, or A$10.01, an 18 percent premium per share. The shares were halted earlier on Tuesday pending the announcement, having last traded at A$8.50.
“With a A$10 handle in front, the offer doesn’t look bad,” Sydney-based CLSA analyst Sholto Maconochie said, adding the deal would “create the leading mall operator globally”.
Shares in Unibail-Rodamco, which was formed in 2007 by the merger of France’s Unibail and Dutch-based Rodamco, were down 4.0 percent at one point, with analysts at Kepler Cheuvreux saying that the deal looked expensive.
Shopping center owners are scrambling to reinvent themselves to keep up with rapid changes in consumer behavior, with the expansion of e-commerce giant Amazon.com coinciding with an explosion in online purchases, while consumers increasingly treat malls as places for socializing and window shopping.
Once dominant US department store operators such as Macy’s Inc. and J.C. Penney Co. Inc. have announced plans to shut hundreds of stores in recent years, putting pressure on landlords to find new “anchor tenants” or come up with new ways to grow returns.
“Westfield has got assets in the UK and in the US that are all in mature Amazon markets. They’re already 50 percent through that online retail switch,” Morningstar analyst Tony Sherlock said of the deal.
The Lowy family, which owns 9.0 percent of Westfield, said they would rather be investors than executives after putting in a combined 145 years at the company, which has stakes in 18 suburban US shopping centers, three of which it wholly owns.
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