Investors in shopping centre behemoth Westfield Group (WDC.AX) and Westfield Retail Trust (WRT.AX) have endured months of uncertainty over the controversial merger proposal that was announced on December 4 last year. However, they could finally be given a little extra clarity on April 2 when the Group's chief financial officer, Peter Allen, hosts an information day for investors and analysts.
The proposal, which would have the two entities' local assets merged to form Scentre Group, while the Group's international assets would be split-off to form Westfield Corporation, has divided the market due to the associated costs. While the Lowy family (the founders of the company) are standing firm on the $1.8 billion it insists is payable by the Trust for management & development rights, analysts and investors are arguing that the costs are too great. Some have even suggested the figure should be reduced by as much as $1 billion.
However, it is understood that the information day will not focus on the costs of the deal, but will address the strategic direction of the proposed Scentre Group. For instance, it is suggested that the split would allow each entity (being Scentre Group and Westfield Corporation) to focus on their own growth stories which would arguably generate greater growth and value for shareholders in the long term.
While the presentation will be held at the iconic Sydney Miranda shopping centre, an explanatory memorandum for the transaction is also due out within the next three weeks, which will provide additional cause for debate.
Although management of both entities have expressed their confidence that the deal will be approved based on its original terms, it seems more likely that the deal will be sweetened more in the Trust's favour in order to win over major shareholders.
While both entities are attractive investment prospects at today's prices, Westfield Group's exposure to international markets makes it the more appealing option. Its shares are currently trading at $10.30 and offer a generous 5% dividend yield.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.
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