Unibail-Rodamco SE, the largest commercial landlord in Europe, has agreed to acquire Westfield Corp based in Australia for A$21 billion, equal to $15.8 billion, in the largest property acquisition in the last four years as dropping sales in stores push operators of malls across the globe to merge.
The company, based in Paris, has offered cash and stock valuing Westfield at A$10.01 a share equal to approximately an 18% premium over the closing price on Monday. The offer was recommended unanimously by the board of Westfield.
Unibail is taking on the biggest acquisition of a company this year in the region of Asia-Pacific and the largest one ever in Australia, as owners of malls look to contend with increasing pressure from shifting habits of consumers to shop more online.
Shares of these types of companies were hit hard and closures of stores have accelerated, pressuring the landlords to fill the growing amount of empty space and to reinvent today’s shopping centers.
Unibail-Rodamco shares fell by up to 4.1%, the biggest drop since October of 2016, after the announcement of the deal.
Founded in 1959 by Frank Lowy a billionaire, Westfield started with just one mall in the suburbs outside Sydney and has expanded into one of the largest shopping centers manager and owner in the world. Westfield owns as well as operates 35 malls located in the U.S. and UK that are valued at over $32 billion.
The properties held by Westfield include shopping malls in both east and west London, as well as retail space at the World Trade Center in New York. It receives nearly 70% of its annual revenue of more than $1.8 billion in the U.S., where businesses are attempting to re-purpose the struggling shopping centers.
Jaap Tonckens the CFO at Unibail said that the U.S. market is not likely where you would attempt to sell at this point the lower quality malls, but rather at this point improve them, and ride the storm out and see what takes place from that point.
This transaction is the largest for real estate since an apartment tower was sold by Lehman Brothers Holdings for over $16 billion completed back in 2013.
This transaction implies a $24.7 billion enterprise value. Unibail offered 0.0184 of shares plus cash of $2.67 for each share of Westfield, which represented 65% stock to 35% cash.
Unibail has sold less dominant and smaller assets in its retail portfolio in Europe and reinvested its proceeds in larger malls that are expected to remain more resilient to online shopping growth.