Europe's Unibail makes $16-bn bid for Westfield to counter online threat

Around 37% of the combined entity's portfolio would be in France and 22% in the United States

Europe's biggest property firm Unibail-Rodamco is to buy US and UK mall operator Westfield Corp for $16 billion, a defensive move to create a global leader in a sector grappling with the online shopping challenge led by Amazon.

The deal gives Europe-focused Unibail, which owns 'Les 4 Temps' and 'Forum des Halles" in Paris and has centres spreading from Helsinki to Valencia, exposure to the United States and Britain, where Westfield operates 35 malls, including landmark premises in London.

Under its Australian billionaire chairman and co-founder Frank Lowy, Westfield has pioneered US mall redevelopment, introducing upscale food courts, high-end restaurants, bars, cinemas and boutique fashion outlets to entice shoppers.

Talks to seal a deal had taken just six weeks, said Lowy whose family will no longer run the company he set up in 1960 but will end up with a 2.8 per cent stake in the combined group.

Lowy said it made sense to sell because Unibail offered a "very good price", but acknowledged that the sale partly reflected global consolidation and the pressure on retailers.

A tough consumer spending environment and intense competition from online rivals has made retailers more selective with their expansion plans, making life tough for shopping centre operators and driving consolidation in the sector.

Unibail's move dwarfs British shopping centre owner Hammerson's purchase of smaller rival Intu Properties for some 3.4 billion pounds, creating a global leader with $72 billion of gross market value in 27 retail markets under the distinctive red Westfield logo.

Around 37 per cent of the combined entity's portfolio would be in France and 22 per cent in the United States.

"Westfield is the best fit for us and a natural extension of our strategy," Unibail's chief executive Christopher Cuvillier said following the announcement of the proposed deal, which would be worth $24.7 billion including debt.

Unibail is focused on large sites with heavy footfall and high-profile tenants such as Apple, Zara and Primark and analysts said it would gain from importing the Westfield model.

Under the terms of the deal, Westfield shareholders would receive cash and shares totalling $7.55, or A$10.01, an 18 percent premium per share. The shares were halted earlier on Tuesday pending the announcement, having last traded at A$8.50.

"With a A$10 handle in front, the offer doesn't look bad," Sydney-based CLSA analyst Sholto Maconochie said, adding the deal would "create the leading mall operator globally".

Shares in Unibail-Rodamco, which was formed in 2007 by the merger of France's Unibail and Dutch-based Rodamco, were down 4 per cent at 1500 GMT, with analysts at Kepler Cheuvreux saying that the deal looked expensive.

Retail Reinvention

Shopping centre owners are scrambling to reinvent themselves to keep up with rapid changes in consumer behaviour, with the expansion of e-commerce giant Amazon.com coinciding with an explosion in online purchases, while consumers increasingly treat malls as places for socialising and window shopping.

Once dominant United States department store operators such as Macy's Inc and J C Penney Co Inc have announced plans to shut hundreds of stores in recent years, putting pressure on landlords to find new "anchor tenants" or come up with new ways to grow returns.

"Westfield has got assets in the UK and in the US that are all in mature Amazon markets. They're already 50 per cent through that online retail switch," Morningstar analyst Tony Sherlock said of the deal.

The Lowy family, which owns 9 per cent of Westfield, said they would rather be investors than executives after putting in a combined 145 years at the company, which has stakes in 18 suburban U.S. shopping centres, three of which it wholly owns.

Deutsche Bank and Goldman Sachs have committed to provide 6.1 billion euros in funding to cover the cash portion of the offer, Unibail said.