The biggest shareholder in Westfield Retail Trust, UniSuper, called for an overhaul of the company’s board in an escalation of the dispute over the future of the Lowy family’s Westfield empire.
UniSuper chief investment officer John Pearce said the board should be “totally, truly independent’’. UniSuper is the biggest shareholder in Westfield Retail Trust with an 8.5 per cent stake and was a major force in the derailment last week of a $70 billion proposal to recast the relationship between the parent Westfield Group and WRT.
Westfield has proposed merging its Australian and New Zealand business with WRT to create a new entity, Scentre Group, leaving Westfield to focus on its international business in the US, Britain and Europe.
A vote on Thursday of WRT shareholders to approve the restructure was postponed by chairman Dick Warburton after it became apparent that shareholder support would drop just below the required 75 per cent acceptance level.
Mr Pearce said that although 74 per cent of WRT shareholders supported the deal, many investors also held shares in Westfield Group so were not concerned at a possible transfer of wealth out of WRT to the parent company.
There are two directors with a seat on both boards: Steven Lowy, son of founder Frank Lowy, and veteran Westfield executive Peter Allen, who has been a non-executive director of WRT since 2010 and an executive director of Westfield Group since May 2011.
The parent company has 12 directors and WRT eight, but the trust’s directors are effectively appointed by the parent company in that they are put up by the Responsible Entity, which is controlled by Westfield Group.
Even some opponents of the deal appear resigned to the entrenched nature of the WRT board. “There is no way around it in reality,” one fund manager said yesterday. “All that can happen is people vote to change the Responsible Entity.”
If that happened, Westfield Group would lose its role as funds manager for WRT but would keep its property and development management functions.
“It’s a long shot, as in the end the private clients (small investors) would never agree,” the fund manager said, noting they put great store in the Westfield brand.
UniSuper and Westfield have locked horns previously. They fought a lengthy legal battle about the ownership of Perth’s Karrinyup shopping centre before the super fund triumphed in the High Court and bought out the two relevant Westfield entities last year.
Frank Lowy made the bombshell announcement on Thursday morning that if the deal was not supported by WRT shareholders at the meeting later that day, Westfield would go ahead and split its operations anyway. Shareholders are concerned this would devalue WRT.
WRT management and its advisers at UBS must now devise a new information memorandum for shareholders and have it ratified as soon as possible by the Australian Securities & Investments Commission, which is concerned to ensure the shareholders have enough time to cast an informed vote on the new circumstances.
Because the meeting has been adjourned, existing proxy votes may be allowed to stand unless shareholders wish to change them, while the record date for the meeting will remain unchanged, which means that anyone who buys shares now will not be able to vote.
The Australian understands that the meeting for the vote is expected to resume on or before Friday June 13.
Mr Warburton and the board of WRT, which supports the restructure, adjourned the meeting for a minimum of 10 days in order to provide WRT’s 85,000 mostly retail shareholders with enough information to vote on the restructure proposal again. The new information relates mainly to Mr Lowy’s threat to go ahead with the demerger without WRT.
Stephen Mayne, policy co-ordinator of the Australian Shareholders’ Association, which opposes the restructure proposal, said he believed chairman Mr Lowy was indulging in “a giant game of bluff’’ because without the inclusion of WRT in the transaction, “there’s too much debt in the structure’’.
A report by the retail investor-focused Morningstar said the deal “results in a transfer of value from security holders in Westfield Retail to Westfield Group’’, albeit a modest one.