Australian retail property giant Westfield is selling the international arm of its business to Paris-based commercial property company Unibail-Rodamco in a $32.7 billion deal that's the country's biggest corporate takeover.
Under the terms of the agreement, Westfield securityholders will receive a combination of cash and shares in Unibail-Rodamco, valuing each Westfield securities at US$7.55 (or A$10.01). The takeover gives Westfield an enterprise value of US$24.7 billion ($A32.7 billion).
In 2014, Wesfield spun off its Australian business into the ASX-listed Scentre Group, separating its American and European businesses from its operations in Australia and New Zealand. Scentre is not part of the deal.
Westfield's shares last traded at $A8.50, giving a market cap of $A17.6 billion.
Unibail-Rodamco says the offer is a 17.8% premium on Westfield's December 11 closing share price and a 22.7% premium on the volume weighted average price over the last three months. Unibail-Rodamco's share price closed at €224.10 on December 11.
The deal creates a massive global business:
Deutsche Bank and Goldman Sachs have provided €6.1 billion in financing to cover the cash portion of the offer, as well as the refinancing requirements at Westfield and Unibail-Rodamco and transaction costs.
The property company says it expects to repay the bridge facility from a combination of senior debt and deeply subordinated hybrid securities (€2 billion) ($A9.5 billion), while approximately €3 billion ($A4.6 billion) of assets are earmarked for disposal over the next several years.
Westfield's billionaire chairman, Frank Lowy, 87, who founded the company in 1960 said the takeover was the culmination of the strategic journey Westfield has been on since its 2014 restructure.
"We see this transaction as highly compelling for Westfield's securityholders and Unibail-Rodamco's shareholders alike," he said.
"Unibail-Rodamco's track record makes it the natural home for the legacy of Westfield's brand and business. We look forward to seeing Westfield continue to grow as part of the world's premier owner of flagship shopping destinations."
The multinational business has 104 shopping centres in Australia, the US and UK, New Zealand, Italy, Croatia and Brazil, with total assets under management in excess of $A63 billion.
Unibail-Rodamco, the largest commercial real estate company in Europe and worth around €17.83 billion (US$21bn), first began sniffing around Westfield two years ago.
The European says it wants to roll out the Westfield brand in the group's flagship shopping destinations and currently has the world's largest development pipeline, worth €12.3 billion (US$14.5bn).
It says the deal with create a global property leader with €61.1 billion (US$72.2 billion) of Gross Market Value in 27 markets and cities.
Once the takeover is completed, Unibail-Rodamco Chief Executive Officer Christophe Cuvillier will be Group CEO with Colin Dyer will be the Group Chairman of the Supervisory Board. The company has two-tier Board structure with a Supervisory Board and a Management Board. Two Westfield board members, including Peter Lowy, will be appointed to the Supervisory Board. A newly created Advisory Board, chaired by Frank Lowy, will provide the Group with independent advice.
The Lowy family said they intend to retain a "substantial investment" in the merged company.
Cuvillier said he was delighted by the deal.
"All of us at Unibail-Rodamco have immense respect for what the Lowy family and the Westfield team have accomplished with the Westfield brand and the company's iconic collection of world class shopping destinations," he said.
"The acquisition of Westfield is a natural extension of Unibail-Rodamco's strategy of concentration, differentiation and innovation. It adds a number of new attractive retail markets in London and the wealthiest catchment areas in the United States.
"We believe that this transaction represents a compelling opportunity for both companies to realize benefits not available to each company on a standalone basis, and creates a strong and attractive platform for future growth."
The footprint of the combined businesses:
Westfield is a top 20 ASX listed company and one of the largest global real estate companies by market capitalisation.
In its latest half year results, Westfield posted 18% a increase in revenue to $US987.6 million. Profit after tax was up almost 20% to $US588.9 million.