The Lowy family and Westfield (WDC) have blinked and changed the terms of their controversial split plan, first revealed last December, in an attempt to save the deal from possible defeat at a meeting of securityholders on May 29.
The change was revealed yesterday in a statement to the ASX.
Rising opposition from a number of big shareholders to the original shape of the deal, especially the gearing for the Australian arm of the split (to be called Scentre), has increased pressure on Westfield and Lowy’s to change the terms.
The split would see the Australian and New Zealand assets and management platform merge with the assets held by spin-off Westfield Retail Trust to create a new entity (That’s Scentre), which will hold 47 shopping centres in Australia and New Zealand and have a value of $22 billion.
The newly created Westfield Corporation would own centres in the US and Britain and a high-growth development pipeline in Europe and the US.
Investors in Westfield were concerned not only about the pricing of the deal, but also the level of gearing that Scentre would hold.
A change was always going to happen after broker CLSA found 58% of investors it surveyed would vote against the original proposal.
Under the original proposal, the net debt of Westfield’s Australia and New Zealand business was to be $7.1 billion. That has been cut by $300 million.
As a result, the net tangible assets for Scentre will increase to $15.28 billion, or $2.88 per security, from $14.98 billion, or $2.82 a security.
Scentre’s gearing will drop to 37.3%, from 38.2%, which isn’t much of an improvement.
The change came despite the independent experts report describing the original deal as ‘fair and reasonable.’
Mr Lowy defended the group’s original plans on announcing the revised terms to the restructure, saying investors supported the strategy behind the proposal.
“In response to some concerns raised and in consultation with the independent directors of Westfield Retail, Westfield Group has decided to improve the merger terms for Westfield Retail security holders,” he said.
“The transaction is now expected to deliver a 6.6 per cent accretion to Westfield Retail’s forecast 2014 FFO (funds from operations),” he said yesterday.
That is now estimated to be 21.75 Australian cents a share in the year ending December 31, from 21.5 cents in the earlier plan.
The move from Westfield and the Lowy’s didn’t address another concern – the $A1.9 billion Westfield Retail securityholders will pay for Scentre’s management rights.
