Frank Lowy’s Westfield Group (WDC) continues to play hardball with Westfield Retail Trust (WRT) by threatening to set up a new company to hold its Australasian interests regardless of the outcome of that adjourned meeting of WRT securityholders on June 20.
Westfield Retail Trust released a statement last night in which it told the market that Lowy’s Westfield Group will proceed with the merger of local businesses and assets from the group with or without any involvement from the retail trust.
In that case, it would separate its Australian and New Zealand assets and businesses from Westfield Group, to be called ‘Newco Australasia’. That proposal looked like being rejected at last Thursday’s WRT meeting until it was adjourned because of the threat to create Newco.
Proxies for the meeting were 74.1% in favour of the restructure, just short of the 75% supermajority needed. It became apparent at the meeting that proxies from securityholders at the meeting would not be enough to get the proposal over that 75% level.
The adjourned meeting and heavy handed approach from the Lowy interests on the Westfield Group board has triggered a battle of wills between them and some big investors in WRT, and the board of the retail trust.
Now, from last night’s statement, its clear the WRT board remains committed to the original proposal to set up the Scentre company, which would be leveraged, and pay $1.8 billion to Westfield Group for the management rights.
The June 20 meeting will face the same argument – if Westfield Retail Trust securityholders accept the original proposal of last Thursday’s adjourned meeting, the new company would be called Scentre Group, will be created after doing the deal for Westfield Group’s Australasian assets.
Later on Tuesday night the trust issued its second supplementary securityholder booklet on the restructure, outlining the implications for WRT securityholders if Westfield Group pursues a demerger of its Australian assets on its own.
From that the support for the original idea from the WRT board was made quite clear by chairman Dick Warburton.
He argued in a statement the formation of Scentre Group is still in the best interests of securityholders
“The independent board committee believes that there is no prospect of an amended or enhanced deal being negotiated with Westfield Group. Westfield Group has indicated that if the revised proposal is unsuccessful it will pursue the separation of its Australian and New Zealand business without any involvement by Westfield Retail Trust."
"After careful consideration the Independent Board Committee believes that the creation of Scentre Group is the preferred option to maximise long term value for Securityholders and to provide Securityholders with the benefits of a larger, more relevant and more strategically flexible investment without diluting the quality of Westfield Retail Trust’s existing property portfolio,” Mr Warburton said in last night’s statement.
And he warned that if Westfield Group goes it alone in the restructure then “the implications could be materially adverse to Westfield Retail Trust and securityholders”.
However he said, those implications couldn’t be specified because the separation plan wasn’t available. There was no sign last night that Westfield Group was preparing to document the separation proposal.
Mr Warburton said there won’t be another opportunity to buy uncontestedly into such an Australian and New Zealand property group as Scentre, if it is formed.
He also said Westfield Retail Trust won’t get another opportunity to internalise property management for its portfolio and without the merger it would be in a weaker position when bidding for assets.
Mr Warburton warned that if investors simply turned their attention to Newco Australia (the new company proposed by Westfield Group without WRT’s participation), then that would put Westfield Retail Trust’s security price at risk.
Last night’s first statement from WRT said the NSW Supreme Court had given advice to WRT "that it is justified in maintaining the Record Date for determining the entitlements to vote at the resumed meetings as 7:00pm on Tuesday 27 May 2014."
That means those entitled to vote at that date can do so at the June 20 meeting. Anyone buying WRT securities from May 29 onwards will not be able to vote at the meeting.
