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Shopping Centers Today -> October 2001
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WESTFIELD ATTEMPTS TO GRAB RNA
By Dave Bodamer
In an unprecedented move for the shopping center industry, Westfield Holdings, Sydney, the parent company of Los Angeles-based Westfield America, at press time was poised to complete a hostile takeover of Dutch property company Rodamco North America (RNA).
The result of the action, which is contingent on Westfield receiving more than 50% shareholder approval to replace RNA’s supervisory and management boards at a meeting sometime this month, would position Westfield as the world’s second-largest mall company and give it the third-largest portfolio in the United States.
“We would prefer to do this in a friendly manner, but it is obvious from their position in their press statements that they have decided not to discuss our strategic plans going forward,” said Westfield Holdings Managing Director Peter Lowy, who is also CEO of Westfield America, during a conference call with investors and analysts in early September.
Westfield’s takeover bid began when it bought a 23.9% stake in Rotterdam-based RNA from Dutch pension fund Stichtin Pensioenfonds ABP in late August for $486 million. Westfield then approached RNA’s boards and proposed that the company turn over management of its U.S. regional malls to Westfield America, possibly as a prelude to an eventual merger.
RNA denied that request, saying it did not believe the move was in its shareholders’ best interest, and cut off communication between the two companies. Westfield responded by filing a motion for an emergency shareholders meeting to replace RNA’s five-member supervisory and management boards with its own nominees. Its management board proposal includes three members of the Lowy family, including Westfield Holdings Chairman Frank Lowy and Peter Lowy. Westfield then also began discussing immediately merging RNA with Westfield America.
“Westfield will immediately begin work to merge the RNA and Westfield America operations under a dual-listed structure,” said Peter Lowy, in the conference call with analysts and investors. “We believe over time we can add up to $30 million in profit.”
For its plans to move forward, Westfield needs to win another 20% of RNA’s shareholders. In addition to Westfield’s 23.9%, ABP still owns 6.6% of RNA’s stock and is expected to vote with Westfield. Dual-listed means the merged company would trade on the Australian and Dutch stock exchanges. RNA officials did not return phone calls seeking comment; as the situation has unfolded, the company has communicated through press statements.
“Following extensive consideration, the management board and supervisory board decided not to grant the cooperation requested, as they are unanimously of the opinion that Westfield’s plan, and in particular a return to external management, does not serve the interests of all RNA’s shareholders,” according to a statement released by RNA’s management board.
If Westfield succeeds, Westfield Holdings will be the second-largest mall company worldwide after Indianapolis-based Simon Property Group, and with 81 regional malls, its U.S. portfolio would be smaller only than those of Simon and Chicago-based General Growth Properties.
Morgan Stanley REIT analyst Matthew Ostrower said that Westfield’s move is significant for the regional mall sector because it “signifies the emergence of [Westfield as] a potential consolidator, which could be a positive catalyst for mall REIT valuations.”
In 2000, RNA bought Chicago-based Urban Retail Properties. RNA now owns 41 regional malls in the United States.
While the Westfield development was unfolding, RNA also completed a deal with the California Public Employees Retirement Service (CalPERS), under which CalPERS will acquire minority interests in three regional malls. According to CalPERS Information Officer Brad Pacheco, CalPERS is making an equity placement of $222 million with RNA in return for a stake in the malls and a say in major decisions concerning the centers.
The CalPERS deal, in conjunction with a transaction that RNA reached with Kimco Realty Corp., New Hyde Park, N.Y., on four shopping centers in early August, resulted in net proceeds of $238 million. RNA will use the proceeds to pay down debt and decrease its debt/leverage ratio to 52%.
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