'There is no plan B' to Westfield takeover: Peter Lowy

Westfield co-chief executive Peter Lowy is adamant there can be no alternative to the proposed takeover of the global mall owner by European giant Unibail Rodamco.

Debate on merits of the mooted takeover, valued at more than $32 billion when it was unveiled last December, overshadowed what may be Westfield's final full-year profit as a standalone property trust.

The global mall giant, founded and chaired by Sir Frank Lowy, landed a 13.5 per cent lift in its 2017 profit to $US1.55 billion. Much of that derived from property revaluations.

"There is no plan B," Mr Lowy said in response to a series of questions on the current standing of the offer and what would happen if it failed to proceed.

The scrip-heavy deal valued Westfield at $10.01 a share on December 11. By Thursday its value had fallen to about $8.84, taking into account currency conversions of the cash component in US dollars and the Unibail share price in euros.

Unibail's share price has fallen steadily since the takeover, raising questions over whether it could be improved.

"Obviously the terms have changed quite a lot in the last couple of months," Macquarie analyst Rob Freeman said during an investor call.

In reply, Mr Lowy was insistent that "nothing has changed" in the strategic rationale for the deal.

"This is the culmination of the strategic journey and expansion we've taken the company on over the last eight or nine years, of how we have transformed the portfolio," he said.

Adding to speculation

Doubts over the shape of deal emerged soon after the transaction was first outlined, as Unibail's share price fell. JPMorgan analysts issued a note soon after canvassing the prospects of a competing offer or a re-cut merger ratio.

Unibail itself only added to the speculation this week, announcing that while it had "no intention to change the terms of the offer ... it does of course reserve the right to do so".

Led by Sir Frank, the Lowys have overcome scepticism about their corporate plans previously. Four years ago they rescued a controversial restructure proposal from the brink of failure, eventually winning over sufficient shareholder support.

On the measure preferred by the sector, funds from operations, the retail landlord booked a 2.3 per cent lift to $US706.8 million.

But there may be warning bells in Westfield's specialty sales growth figures – a key metric watched closely by analysts.

Its specialty tenants booked sales growth of 2.7 per cent for the full year, but that had slowed to 1.7 per cent in the December quarter.

The Westfield strategy has been to shift the weight of investment into its larger flagship malls, away from the regional malls.

The rationale for that is clear, with speciality sales growth of negative 0.3 per cent over the full year in regional malls, compared to growth in the flagship malls of 2.7 per cent.

However, in the December quarter regional malls booked 1.7 per cent growth.

Global expansion

Westfield has been busy on redevelopment of its global portfolio, launching the major stage of the $US1 billion ($1.3 billion) redevelopment of Century City in Los Angeles.

It also launched the $US600 million expansion at UTC in San Diego in the last quarter of last year, including a new Nordstrom department store.

The comparable net operating income for Westfield's portfolio was up 2.2 per cent in the last 12 months. For 2018, it expects that figure in the range of 2.5 per cent to 3 per cent.

But given the proposal to combine Westfield and Unibail-Rodamco, the Lowys said they will not set out FFO or distribution forecasts for 2018.

Let's block ads! (Why?)