The $70 billion reshuffle of the Lowy family controlled Westfield shopping centre group will be delayed a fortnight, or possibly longer while the two companies, their boards, advisers and perhaps the regulators try make sense of an extraordinary day in Sydney yesterday.
It is likely, but not confirmed at this stage, that the whole revamp of Westfield could be put off for a longer period of time after some amazing comments (more like threats) from Westfield Group chairman, Frank Lowy, aged 83.
Those comments and the reaction of the Westfield Retail Trust (WRT) board too them, could mean a new set of bid documents and possibly a new independent expert’s report.
Whatever, it is also very clear is that Westfield Group (WDC) will have to sweeten the revamp terms for shareholders in Westfield Retail Trust (to be renamed Scentre Group after the reshuffle) to get the proposal up.
Small shareholders and some major fund managers in WRT sank the proposed revamp yesterday.
Under the restructure plan, Westfield’s Australian and New Zealand businesses would merge with WRT to create a new entity, to be called Scentre.
Westfield Group’s international business, which includes malls in Great Britain and at the World Trade Center in New York, would become Westfield Corporation.
A meeting of WRT securityholders was adjourned suddenly yesterday afternoon before the final outcome of a vote on the restructure was known.
It was clear that the meeting would not have approved the revamp with proxies in favour of the split only reaching 74.1%. A supermajority of 75% was needed to give the revamp the greenlight.
From comments from the floor of the WRT meeting yesterday it was also clear there was not enough votes from securityholders present to push the vote over the 75% mark.
So an adjournment was called by chairman Dick Warburton citing comments Westfield Group chairman, Frank Lowy had made earlier in the day at the Westfield Group meeting (which voted 98% in favour of the deal).
WRT 1Y – Vote on restructure proposal adjourned
At the earlier meeting Mr Lowy vowed to press ahead with plans to split Westfield’s Australasian and global businesses regardless of the whether WRT shareholders supported the deal.
Board member Steven Lowy told the WRT meeting that Mr Lowy had told a Westfield Group’s meeting of shareholders that approved the restructure plan on Thursday morning that Westfield Group intended to split itself into separate Australian and international companies regardless of whether WRT voted the deal down.
There was no opportunity for the deal to be renegotiated, he indicated.
But the board of WRT considered the warning from Mr Lowy to be a "material change" in the outlook for its investors, and told the meeting they should have more time to consider the restructure plan.
"I resent the idea that Westfield Group is trying to strong-arm WRT," said Mr Warburton in response to a shareholder complaint during the at times heated meeting.
"We want to give people a long and better opportunity to look at this," he was quoted as saying in media reports.
Mr Lowy’s warning stopped the meeting and prevented the vote. Would the WRT board considered the warning from Mr Lowy to be material if the proxies had been 75% or better? I doubt it.
But to get the deal across the line The Lowy camp will have to meet the objections of the shareholders opposed to the deal (too much debt and gearing and not enough of a share of the company).
That stance might not last. ASIC, the key regulator, seems certain to become involved, if only to bless the adjournment and rule on whether a new vote would have to be conducted, or whether the old one would stand.
And if the warning from Mr Lowy is "material" then the question of a new independent expert’s report will have to be considered.
If is clear that the board’s of both Westfield companies were aware of the proxies at the WRT meeting, and had been aware for two days.
Proxies for both meetings closed on Tuesday night and the size of the vote would have been apparent then.
