Westfield Corporation (ASX: WFD)
Westfield is an internally managed, vertically integrated, shopping centre group undertaking ownership, development, design, construction, funds and asset management, property management, leasing and marketing activities and employing approximately 2,000 staff worldwide. It is building a network of shared technology and data to enable new and better ways to shop.
Recently, Westfield announced its operational results for the 3 months ending on 31 March 2018 wherein specialty sales were up 7.1% for the quarter and average Specialty rent was up 5.5% on the previous year. In March 2018, Westfield successfully launched the first stage of the £600 million expansion at Westfield London, including a new John Lewis department store. Early trading at Westfield London was positive with strong trading momentum continuing at its recently completed projects at Century City and UTC. The proposal to combine Westfield and Unibail-Rodamco continues to progress. The combination will create a $74 billion portfolio including 102 retail assets, of which $56 billion or 85 per cent would be flagship. The combined portfolio will operate leading assets in New York, Los Angeles, Silicon Valley and the Washington DC area and in London, Paris, Madrid, Barcelona, Stockholm, Vienna and Milan. It will have strong growth prospects with a $15.6 billion development program. The proposal has the full support of the Lowy Family and the Westfield Board and the Extraordinary General Meeting to consider the proposal is scheduled for 24 May 2018. A flash back on the terms of the agreement reveal that Westfield securityholders are said to receive a combination of cash and shares in Unibail-Rodamco, valuing each Westfield security at a price of US$7.55 (or A$10.01). The price thus represents a premium of 17.8% to Westfield’s closing security price on 11 December 2017 and implies an enterprise value for Westfield of US$24.7bn.
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Overview of the Simplified New Structure (Source: Company Reports)
If the transaction is approved, Westfield securityholders will hold approximately 28 per cent of the stapled shares in this new group and will be able to trade those securities on the ASX in the form of CDIs, as well as on Euronext Paris and Euronext Amsterdam in the form of stapled shares. The Westfield Board appointed Grant Samuel & Associates as Independent Expert to undertake an independent assessment of the transaction. The Independent Expert also concluded that the transaction was in the best interests of Westfield securityholders, in the absence of a superior proposal. Given the offer price, which is above the current market price of $9.1; the deal looks to be a favourable one that can be considered while securities of the new group can be traded on the ASX in the form of CDIs.
OneMarket Limited
In addition to the proposed transaction with Unibail-Rodamco, Westfield is setting up its technology company, OneMarket, which will be spun out during the takeover and is proposed for listing on ASX with $160 million in cash (enough to meet cash needs until 2019) and no debt. Existing shareholders will have 90 per cent stake in OneMarket while Unibail will hold the other 10 per cent. The business may seek additional funding for growth in future. Grant Samuel & Associates was also appointed as Independent Expert to undertake an independent assessment of the demerger. The Independent Expert has also concluded that the proposed demerger was also in the best interests of Westfield securityholders. OneMarket has many networked retail technology products and its consumer-facing engagement platform, Hadley has been designed to deliver the best consumer-centric commerce experiences. Then Intelligent Parking Solutions is expected to help malls upgrade parking offering. These are just to name a few. The demerger is conditional on the Unibail-Rodamco acquisition of Westfield proceeding, but the Unibail-Rodamco acquisition of Westfield is not conditional on the demerger. Therefore, one can look for exposure to One market shares as the deal looks favourable and the digital technology is influencing consumer behaviour, which is expected to benefit the group later.
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Revenue Drivers (Source: Company Reports)
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