Westfield Restructuring Gets Thumbs Up

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Monday, April 14th, 2014
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Westfield’s plans to merge its Australian and New Zealand businesses into a single entity distinct from its other international operations has been endorsed by one of the world’s big four accounting firms.

Mall operator Westfield Group plans to separate its 47 shopping centres in Australia and New Zealand from its other global operations, in order to merge them with Australia’s Westfield Retail Trust and create a new entity which will go by the name of Scentre Group.

Westfield’s other shopping centres in US and UK would then be left as a separate international business referred to as Westfield Corporation, which would be better positioned to focus on operations in the northern hemisphere.

According to Westfield Group chairman Frank Lowy the restructuring plan will “[create] two leading and independent groups…[and] generate greater long-term growth and value for both Westfield Group and Westfield Retail Trust investors.”

KPMG, which has been entrusted by the retail and property group with the provision of an independent, third-party assessment, has endorsed the plan, stating that a split in the company’s global operations best serves the interests of its security holders.

According to the independent expert report produced by KPMG, the fair value contributed by Westfield Retail Trust security holders is expected to be between 51.3 per cent and 51.8 per cent of Scentre Group, while the proposal leaves them holding 51.4 percent of the newly merged entity.

The report points out that the proposed “merger of equals” would produce strong benefits for operations, including improvements to the corporate governance structure and the removal of potential conflicts of interest.

While KPMG concedes that the plan is not without its drawbacks, including an impact on the risk profile of Westfield Retail Trust and a diminution in net tangible assets per share, it nonetheless considers the advantages to outweigh them.

KPMG is not alone in giving the thumbs up to Westfield Group’s separation and merger proposal. A report by corporate advisory Grant Samuel & Associates concluded that the plan was fair and reasonable, pegging the relative contribution made by shareholders in Westfield Group to Scentre Group to be between 48 per cent and 56 per cent, while leaving securityholders with 48.6 per cent of the new entity.

The company’s security holders are scheduled to vote on the proposed restructuring on May 29.

 

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