Westfield Group’s formidable chairman, Frank Lowy, may be preparing the ground for a change in the terms of the shopping mall owner’s proposed $70 billion restructure because of a backlash from investors.
Westfield is hosting institutions at a briefing tomorrow at its Miranda shopping centre in Sydney’s south where opposition to the deal is expected to be heard.
The briefing will be lead by veteran Westfield executive Peter Allen, who is to head a new listed company called Scentre Group, which will be created by merging the group’s Australian and New Zealand shopping centre businesses with Westfield Retail Trust. The transaction needs 75 per cent approval from Westfield Retail Trust investors.
A survey by top-tier brokerage CLSA, revealed over the weekend by The Weekend Australian, shows 58 per cent of investors surveyed in Westfield Retail Trust are planning to vote against the deal, which many regard as too favourable to Westfield.
“This is likely understated, as most investors answered anonymously,” analyst John Kim said in the note to clients. Now market sources are indicating that there may be some room for Westfield Retail to renegotiate either the terms of the proposal or at least to refashion it as more saleable.
The Lowy family has been resolute in sticking to the original proposal, which it unveiled to the market last December, that ascribed value of $1.8bn to the shopping centre giant’s Australasian management platform.
Well-placed sources said not to expect a change in the restructure’s terms until perhaps even a week ahead of the proposal up for a vote in May as the octogenarian billionaire “plays chicken” with investors. Westfield declined to comment yesterday.
Mr Kim said the chief concern for investors was the high price for Westfield Group’s management business, which will be sold to Scentre under the deal.
“We have further conviction Westfield Group will need to sweeten the merger ratio in Westfield Retail Trust’s favour in order to obtain 75 per cent shareholder approval.”
However, there is still some belief in the market that the independent expert’s report to be released with the explanatory memorandum on the deal will help to sway investors and proxy advisory houses. These groups are expected to play a crucial role as many pension funds direct their investment managers to follow instructions from these advisers.
Observers have tipped that the independent expert will declare the deal in the best interest of shareholders but not necessarily fair and reasonable. UniSuper, a significant investor in Westfield Retail with 7.27 per cent, is thought to be holding out for a better deal, along with at least five heavyweight local investment houses that have confirmed their positions with The Australian.
UniSuper head of property Kent Robbins declined to comment, but in an interview in January he described the proposal as “a bridge too far”.
“The implied price of that management platform is just off the scale in our view,’’ he said at the time. Still, concerns remain over what some in the market have described as a “jawbone” exercise by Westfield.
Westfield Retail closed up 1c at $2.98. Westfield Group closed down 3c to $10.25.