Unibail-Rodamco, a leading commercial property company in Europe, has entered into an agreement to acquire Westfield Corp., the 12th largest U.S. retail property owner, for an estimated $15.8 billion.
The cash and stock deal values Westfield at $7.55 per share, or 17.8% above Monday’s closing price. The transaction was unanimously recommended by the boards of both companies and is expected to close in the first half of 2018.
“The acquisition of Westfield is a natural extension of Unibail-Rodamco’s strategy of concentration, differentiation and innovation,” said Christophe Cuvillier, chairman of the Management Board and CEO of Unibail-Rodamco. “It adds a number of new attractive retail markets in London and the wealthiest catchment areas in the United States. It provides a unique platform of superior quality shopping destinations supported by experienced professionals of both Unibail-Rodamco and Westfield.”
The acquisition adds to the Paris-based Unibail-Rodamco’s portfolio, which was valued at approximately $50 billion (42.5 billion euro) as of June 2017. The company operates 71 shopping centers across Europe, office buildings in the Paris business district and 10 convention and exhibition venues in Paris.
Westfield owns and operates 35 properties in the U.S. and U.K. valued at $32 billion. Roughly 70 percent of its annual revenue comes from its U.S. operations.
With the addition of Westfield, Unibail-Rodamco will have a gross market value of $72.2 billion. It will manage a portfolio of 104 assets across 13 countries in top cities like London, Los Angeles, Munich, Vienna and New York, which attract 1.2 billion visits annually. These locations will include 56 flagship shopping destinations.
Frank Lowy, chairman of the Westfield board of directors, said, “The transaction announced today is the culmination of the strategic journey Westfield has been on since its 2014 restructure. We see this transaction as highly compelling for Westfield’s securityholders and Unibail-Rodamco’s shareholders alike. Unibail-Rodamco’s track record makes it the natural home for the legacy of Westfield’s brand and business. We look forward to seeing Westfield continue to grow as part of the world’s premier owner of flagship shopping destinations.”
Westfield was founded by Lowy in Sydney Australia with one shopping center in 1959. Lowy will retire from the board once the transaction is approved, and his sons Peter and Steven, who are currently co-CEOs, will also retire.
The deal comes amid other possible mergers and acquisitions in the mall space as these property owners grapple with how to evolve in light of the rapid changes shaking the industry. Reuters reported Monday that mall owner GGP Inc has rejected a $14.8 billion buyout offer from Brookfield Property Partners, its biggest shareholder. Though the company denies it, reports also contend that Simon Property Group could make a bid for Macerich, which operates 48 regional shopping centers in the U.S.
In an interview with Bloomberg, Unibail-Rodamco CFO Jaap Tonckens addressed the current state of retail and why the acquisition makes sense now.
Speaking about why he’s undaunted by the slowing U.K. economy, Tonckens said, “We’re not going into the UK. We’re going into London…As we’ve said about London, we believe it is a global city. It’ll be fine. Will it be choppy? Probably but this is the benefit of having a company the size, scale, balance sheet that we have that we can take advantage of opportunities where others may not.”
The company, which had previously announced it would sell $3.5 billion (3 billion euros) worth of underperforming, non-core assets, said it will refrain from any sales of U.S. properties given the challenges in the market, at least in the short term.
Tonckens was upbeat about the state of retail, saying the mall delivers what that young consumers are looking for with its combination of shopping, entertainment options and restaurants.
“You’re talking about people who want to have an experience,” he said. “You say experience doesn’t translate into shopping but actually more restaurants, more food and beverage, more entertainment in the shopping centers and some stores at this point are really geared toward offering that level of engagement and brand interactivity with the shoppers. and we fundamentally that Westfield is a leader in that field as well.”