2017 has seen Australian retailers bracing for the entrance of online retail giant Amazon to enter the market. The anticipated arrival of Amazon has brought fears to the department stores Big W, Kmart and Target, as well as other specialty stores. This, in turn has led to fears by landlords, who face losses if Amazon becomes too dominant. However, the entrance of Amazon into the Australian market was somewhat underwhelming with the fabled low prices few and far between, and many prices higher on Amazon than from other retailers.
It now seems that the strength of Australian shopping centres may be bolstered by Sir Frank Lowy’s decision to sell the Westfield Corporation to Unibail-Rodamco for $32 billion.
Unibail-Rodamco is a commercial real estate company located in Paris. They specialise in shopping malls in many European capital cities, and operate offices and convention centres in Paris. With the acquisition of Westfield, they will become a $95 billion retail giant with properties in major cities in 13 countries.
Westfield is a global giant, operating 6500 retail outlets including the World Trade Centre in New York City. Westfield has been valued at $10.01 per share, giving a total value of $35b including debt. Unibail-Rodamco are offering 0.1844 of its own shares for every Westfield Share, plus $US2.67 cash.
The deal provides new markets to both Unibail-Rodamco and to Westfield. Neither of these companies would be able to access these markets by themselves. Unibail-Rodamco is continuing its process of moving its investment portfolio into bigger shopping malls who will hopefully be more resilient to the rise of online shopping.
In many other areas of the industry, we see consolidation happening. No doubt, this is due to the rise of ecommerce and the increasing struggle for traditional retailers.
Target: Westfield Group
Value: $32 billion
Payment: Shares and Cash
Acquirer Banks: Goldman Sachs and Deutsche Bank
Target Banks: Rothschild and UBS
Reasons: Rising pressure from online shopping giants, and access to new markets for both groups.