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European Unibail To Buy Westfield And Create World’s Largest Mall Owner

Westfield Century City, LA
Westfield Century City in LA

CLARIFICATION, DEC. 13, 6:30 P.M. ET: This story has switched between two numbers for the value of the purchase: $15.7B and $24.7B. Neither is incorrect: U.S. news stories have primarily reported the $16B number, which is Unibail-Rodamco's bid for Westfield. U.K. outlets have leaned toward $25B, which is the enterprise value of the deal including debt. Our story now reflects both numbers.

Unibail-Rodamco has agreed to buy Westfield for about $16B in a deal that creates the largest owner of shopping centers in the world with a portfolio valued at $72B.

Unibail, which is listed in Amsterdam and Paris, announced Tuesday that it had agreed to buy Sydney-listed Westfield in a deal that has been approved by the boards of both companies and the Lowy family, which founded Westfield and is still a big shareholder. Unibail's $16B bid values Westfield at $25B, including debt.

The combined company will have a portfolio of 104 shopping centers in Europe and the U.S., including some of the most well-known in the world such as Westfield World Trade Center in New York, Westfield London and Les Quatre Temps in Paris.

It will be listed in Europe and Sydney and have a market capitalization of $36B, which still puts it behind Simon Property Group in terms of overall value. 

It said 56 of its centers are "flagship" destinations and that the Westfield brand would be rolled out across them over time.

As well as the existing portfolio, the combined company will have a $14.5B development pipeline. 

The move comes at a time of upheaval in the retail world, with consumers spending increasing amounts online rather than in brick-and-mortar stores. This has created the opportunity for consolidation, with the U.K.’s two largest specialist retail REITs, Hammerson and Intu, announcing a merger to create a £19B company last week, and Brookfield attempting to buy General Growth Properties for $15B.

Unibail said its focus on the best-quality malls made it more resilient to the challenges posed by online retail, and that its purchase of Westfield would increase this resilience.

“It adds a number of new attractive retail markets in London and the wealthiest catchment areas in the United States,” Unibail Chief Executive Cristophe Cuvillier said. “It provides a unique platform of superior quality shopping destinations supported by experienced professionals of both Unibail-Rodamco and Westfield.”

Frank Lowy
Westfield Corp. founder Frank Lowy

Unibail shares were down 2.6% at lunchtime on the day the deal was announced.

“Our first take is that we are not over-excited about the price,” said Peter Papadakos, an analyst at Green Street Advisors in London. “Unibail is buying at an implied initial yield of below 4%. If you think about where cap rates and yields are going in the U.S. and the U.K., which we think will be stable to upwards, the pricing is aggressive.”

Unibail said it would be selling around $3B of assets from the combined company, but sales in the U.S. are unlikely for now.

“The U.S. is probably not the market where you’d try to sell lower-quality malls at this point,” Unibail-Rodamco Chief Financial Officer Jaap Tonckens said in an interview with Bloomberg Television. “I think we’ll focus on improving them, ride out the storm and see where we go from there.”

Cuvillier and Tonckens will be CEO and CFO of the combined company respectively, and the deal sees the Lowy family step back from a company they have built up over six decades. Family patriarch Frank Lowy started the company with a single shopping centre outside of Sydney in 1959.

“Assets I’ve spent my life building, I could not imagine a better home for them than in this new company," he said.