Westfield sold for $16B as mall owners merge
Unibail-Rodamco SE, Europe's largest commercial landlord, agreed to buy Australia's Westfield Corp. for about $15.8 billion in the biggest property acquisition since 2013 as declining store sales push mall operators worldwide to merge.
The Paris-based company offered a combination of cash and stock. The offer has been unanimously recommended by Westfield's board.
Locally, Westfield operates Westfield Old Orchard in Skokie, Fox Valley Mall in Aurora and Hawthorn Mall in Vernon Hills.
Unibail is mounting the biggest takeover of a company in the Asia-Pacific region this year - and the largest ever in Australia - as mall owners seek to contend with relentless pressure from online commerce. Shares of such companies have been hit hard and store closures are accelerating, pressuring landlords to fill empty space and reinvent shopping centers. Unibail-Rodamco's fell as much as 4.1 percent, the most since October 2016, after the deal was announced.
"This is a combination of two of the best-in-class mall operators in the world," Bloomberg Intelligence analyst Sue Munden said. "They will become a dominant player, have the best relationships with retailers and therefore be best placed to create the malls of the future."
Billionaire founder
Founded by billionaire Frank Lowy, Westfield began in 1959 with one shopping mall in the outer suburbs of Sydney and has grown to become one of the world's largest shopping center owners and managers. Westfield owns and operates 35 malls in the U.S. and U.K. valued at $32 billion, according to its website.
Westfield's properties include shopping malls in east and west London and the retail space in New York's World Trade Center. It gets almost 70 percent of its $1.8 billion annual revenue in the U.S., where companies are trying to re-purpose struggling brick-and-mortar shopping centers.
"The U.S. is probably not the market where you'd try to sell" lower quality malls "at this point," Unibail-Rodamco Chief Financial Officer Jaap Tonckens said in an interview with Bloomberg Television. "I think we'll focus on improving them, ride out the storm and see where we go from there." The deal should be accretive to earnings from the first full year, he said.
The latest transaction is the largest since Lehman Brothers Holdings Inc. sold an apartment owner to a consortium led by Equity Residential for more than $16 billion, a deal that was completed in 2013.
The transaction implies an enterprise value of $24.7 billion, according to the statement
Selling assets
Unibail-Rodamco has been selling smaller and less-dominant assets in its European retail portfolio and reinvesting the proceeds in its development pipeline, which includes larger malls that are expected to be more resilient to the growth of online shopping. The company has $9.5 billion of planned projects, according to its website.
The landlord will continue with a plan announced earlier to sell 3 billion euros of malls that are noncore, Tonckens said in the interview.
Shares of Westfield have declined 9.4 percent this year, headed for their worst performance since 2011. The shares were suspended Tuesday ahead of the announcement.
In other signs of consolidation in the industry, Brookfield Asset Management Inc. is seeking to buy the portion of mall owner GGP Inc. it doesn't already own. New York-based hedge fund Third Point is pushing for change at Macerich Co., including a possible sale, after building a stake in the real estate investment trust, people familiar with the matter said last month. Even after getting a boost from Brookfield's interest, GGP shares are down 6.4 percent since the beginning of the year. Westfield is the 12th largest U.S. landlord, according to data compiled by National Real Estate Investor last year.
The deal will lead to speculation that Simon Property Group Inc., the biggest U.S. mall owner, will also look to expand, Munden said. The firm, which has seen its shares fall 8.7 percent this year, owns about one-fifth of Klepierre SA, the Paris-based shopping center owner that's been renovating its properties.
• Daily Herald Business Writer Kim Mikus contributed to this report.