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Europe's biggest mall owner snaps up Westfield for $25bn Europe's biggest mall owner buys Westfield for $25bn
(about 9 hours later)
Europe’s biggest commercial property company is to buy Westfield, the company behind two big shopping centres in London, in a $25bn (£18.5bn) deal which will make it the largest mall operator in the world. Europe’s biggest commercial property company is to buy Westfield, the Australian company behind the UK’s two highest-earning shopping centres, in a $25bn (£19bn) deal that will create the world’s largest mall operator.
In the latest property sector shakeup, France’s Unibail-Rodamco, which owns Forum des Halles in Paris, has agreed to buy the Australian mall owner for $24.7bn, with plans to roll out Westfield centres in Europe and the US. The Lowy family, Westfield’s biggest shareholder, is selling its 9.5% stake for a mixture of cash and Unibail shares, which it intends to keep. Unibail-Rodamco of France, which owns Forum des Halles in Paris, plans to roll out Westfield centres in Europe and the US. The Lowy family, Westfield’s biggest shareholder, is selling its 9.5% stake for a mixture of cash and Unibail shares.
The growth of online shopping, fuelled by the online behemoth Amazon, is forcing shopping centre operators to focus on the best assets. The planned tie-up comes as the growing number of people buying items online, fuelled by Amazon, forces shopping centre operators to focus on their best assets.
It is the second large-scale property deal in the past week: Hammerson, which owns Birmingham’s Bullring shopping centre, agreed to buy Intu, the company behind Manchester’s Trafford centre, in a £3.4bn deal that will create Britain’s biggest property company worth £21bn. But Jaap Tonckens, Unibail-Rodamco’s chief financial officer, said shopping centres still had a future. “Especially younger people do their research on their phones and then go to malls to get what they want and to hang out with their friends and have a meal ... You are talking about people wanting an experience,” he told Bloomberg.
Westfield runs the malls in Shepherds Bush, west London, and at Stratford, east London. It has plans to build a third centre in Croydon, south London. Its total portfolio of 35 malls includes centres in Italy, the US and Australia. Unibail, Europe’s biggest mall operator, runs 69 shopping centres across 11 EU countries but lacks a presence in the UK and US. Many retailers are cutting back shop-floor space and focusing their property portfolios on the most popular centres as consumers increasingly have fewer reasons to visit a store.
Christophe Cuvillier, chief executive of Unibail, said the takeover of Westfield “adds a number of new attractive retail markets in London and the wealthiest catchment areas in the United States”. Marks & Spencer, Debenhams and Toys R Us have announced plans to close stores, while the collapse of BHS last year left shops empty. Rents in premium shopping centres are holding up or rising, while less popular centres and some high streets are struggling.
Jaap Tonckens, the French company’s chief financial officer, told Bloomberg TV that despite the popularity of online shopping, malls still had a future. “Especially younger people do their research on their phones and then go to malls to get what they want and to hang out with their friends and have a meal ... You are talking about people wanting an experience.” New or significantly refurbished UK shopping centres accounted for 63% of leasing transactions in the 12 months to June, according to the property advisory company Cushman & Wakefield.
Both company boards unanimously recommended the deal. The news comes a few days after Frank Lowy, the Westfield chairman and co-founder, received a knighthood. He and his sons – Steven and Peter – who are co-chief executives, will step down but Lowy will chair an advisory board for the new firm. In the US, where the majority of Westfield’s shopping centres are located, there is a bigger shake-out underway. Of the roughly 1,200 across the country, less than half are expected to be in operation five years from now. Years of underinvestment in older centres combined with overexpansion in the face of the online shopping boom is taking its toll.
The Westfield business empire grew out of a delicatessen and later a shopping centre founded in Sydney in the 1950s by Lowy – now one of Australia’s richest men – and the late John Saunders, both immigrants from Hungary who survived the Holocaust. According to Saunders’ adopted daughter Betty Saunders-Klimenko, the two men “were in a field in the western suburbs when the bank told them they needed a business name”, and so the name Westfield was born. Unibail’s takeover of Westfield comes after Hammerson, which owns Birmingham’s Bullring shopping centre, agreed to buy Intu, the company behind Manchester’s Trafford centre, in a £3.4bn deal last week that will create Britain’s biggest property company worth £21bn.
Analysts at Morgan Stanley said: “Both companies have a similar strategic vision but arguably with a materially different regional footprint. As such, the deal would plug the last remaining holes in Unibail-Rodamco’s European dominant positioning – now also UK and Italy – and give the group access to a high-quality portfolio in the US.” Westfield runs shopping centres in White City, west London, and Stratford, east London. It has plans to build a third centre in Croydon, south London. The company’s portfolio of 35 centres includes sites in Italy, the US and Australia. Unibail runs 69 shopping centres in 11 EU countries but lacks a UK or US presence.
• Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here. Analysts at Morgan Stanley said: “The deal would plug the last remaining holes in Unibail-Rodamco’s European dominant positioning – now also UK and Italy – and give the group access to a high-quality portfolio in the US.”
Charlotte Pearce, an analyst at the retail consultancy GlobalData said the Westfield takeover would enable Unibail to benefit from expected growth of 7.2% in the UK super-mall market over the next five years to £12.3bn.
“With consumers favouring destination shopping locations which appeal to shoppers’ desire for a social and lifestyle experience, and Westfield setting the bar in terms of focus on overall experience, this is a beneficial move,” she said.
Both company boards unanimously recommended the deal. Frank Lowy, the Westfield chairman and co-founder, recently received a knighthood. He and his co-chief executive sons, Steven and Peter, will step down, but Lowy will chair an advisory board for the new company.
The Westfield business empire grew out of a delicatessen and later a shopping centre founded in Sydney in the 1950s by Lowy, now one of Australia’s richest men, and the late John Saunders, both immigrants from Hungary who survived the Holocaust.
Follow Guardian Business on Twitter at @BusinessDesk, or sign up to the daily Business Today email here.