Westfield Group improves trust merger terms

Westfield Group has succumbed to shareholder pressure and announced it will be improving the terms of its proposed merger for Westfield Trust unit holders by $300 million.

Under the adjusted proposal, Westfield will reduce the net debt contributed by the group's Scentre Group - made up of the Australian and New Zealand businesses- by $300 million to $6.8 billion.

As a result, Scentre Group’s pro forma net assets, at 31 December 2013, will increase from $14,980 million ($2.82 per security) to $15,280 million ($2.88 per security).

Pro forma gearing will reduce to 37.3%. Slightly above Scentre's targeted range of between 30-35%.

Last December, Westfield proposed splitting up its $70 billion empire to create an international entity to be known as Westfield Corporation.  The rest of the business would be known as Scentre Group - to be made up of its local and New Zealand operations, along with the Westfield Retail Trust (WRT).

A number of WRT unit holders had reportedly expressed concerns about the price of the merger deal and the consensus was that proposal would be voted down at the extraordinary meeting in late May.  

Westfield Group chairman Mr Frank Lowy AC said: “We have met with key investors in both WDC and WRT, the overwhelming majority of whom support WDC’s strategy of restructuring along geographic lines and merging the Australia/NZ business with WRT". " In response to some concerns raised and in consultation with the independent directors of WRT, WDC has decided to improve the merger terms for WRT security holders.”

“The change improves the terms on which WRT security holders are gaining their ownership interest in WDC’s industry leading operating platform." At the same time, he said, the adjusted terms improved the financial position of Scentre Group by reducing its gearing ratio and enhancing its Funds from Operations (FFO).

The transaction is now expected to deliver a 6.6% accretion to WRT’s forecast 2014 FFO.