The Australian Shareholders’ Association has stepped up its attack on Westfield’s proposed $70 billion restructure, taking aim at the fees and influence derived from the large number of investment banks working on the deal.
After on Friday opposing the deal for Westfield Retail Trust (WRT) investors, the ASA yesterday claimed there might be a conflict of interest from the investment banks’ private client arms not ensuring retail investors in the trust received their proxy forms or are pushed to vote for the deal.
Westfield Group is trying to merge the rest of its Australian and New Zealand business with WRT to create new vehicle Scentre, which will own 47 shopping centres valued at $22bn.
Among the ASA’s criticisms is that WRT is putting in 69 per cent of the assets but getting 51.4 per cent of the shares. A vote is to be held at WRT’s annual meeting on May 29, with proxy adviser Ownership Matters also recommending investors reject the deal.
ASA policy and engagement co-ordinator Stephen Mayne said the vote would “live or die” by retail voters and warned that brokers and accountants often did not pass on proxy voting forms to clients, distorting critical decisions.
He wrote to WRT yesterday asking for its 5000 largest shareholders ahead of an attempt to solicit proxies. JPMorgan, Rothschild, Credit Suisse, Deutsche Bank and Merrill Lynch are advising Westfield Group for a combined $47.5 million in fees, while UBS and Morgan Stanley would be paid $22m for advising WRT.
“Hundreds of thousands of proxy voting forms are shredded every year by brokers and we’ve identified this as a problem when you’ve got seven banks sharing in $70m on the deal,” Mr Mayne said.
A Westfield Group spokesman declined to comment.
Investment banks either have their own retail broking arms — which they say are isolated by “Chinese walls” — or agreements with retail brokers.
Analysts at investment banks’ institutional securities arms are typically not allowed to write about deals their bank is advising on, something else Mr Mayne took aim at.
“Spending $70m neutralising seven firms is part of the Westfield recipe for success on this transaction,” he said. “And it’s interesting Macquarie missed out this time and are one of the most critical voices.”
After Westfield this month sweetened the terms for WRT’s investors, Macquarie’s analysts said the deal would weigh on the share price and constrain earnings growth, but held longer-term value.
The ASA will oppose Westfield Group’s remuneration report and maybe the re-election of Frank Lowy at its annual meeting, also on May 29.