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Update: Unibail-Rodamco signs US$15.7B deal to sweep up mall giant Westfield

Europe's Unibail-Rodamco SE is set to become one of the world's largest retail landlords following its agreement to buy Australian mall giant Westfield Corp. for total shareholder consideration of US$15.68 billion.

The deal, which implies a total enterprise value for Westfield of US$24.7 billion, will create a company with a gross market value of €61.1 billion and extends the reach of Europe's largest listed real estate investment trust to the U.S and U.K. It follows U.K. retail landlord Hammerson Plc's £3.4 billion takeover of rival Intu Properties Plc, announced Dec. 6, which made Hammerson Europe's second-largest listed REIT. Brookfield Property Partners LP also is in talks to buy the shares of mall owner GGP Inc. it does not already own as the retail real estate sector enters a phase of consolidation.

Unibail-Rodamco's new portfolio will hold 104 shopping centers across 13 markets and contain the world's biggest development pipeline valued at €12.3 billion. The deal sees Unibail-Rodamco enter the London market with two operating Westfield properties in the city — Westfield Stratford City and Westfield-London — and the £1.4 billion Croydon Town Centre-Expansion project as part of a joint venture with Hammerson.

The takeover comes at a time when brick-and-mortar retail is facing an existential threat from online retailers like Amazon.com Inc., particularly in the U.S. Unibail-Rodamco, itself the product of a 2007 merger between French retail landlord Unibail and Dutch rival Rodamco, will take on 33 properties in the U.S., according to the Westfield U.S. website.

The deal brings an end to the retail property empire of Frank Lowy, who opened the first Westfield property in Sydney, Australia, in 1959. Lowy will step down as nonexecutive chairman of Westfield, which halted trading Dec. 12, while his two sons Peter and Steven will leave their roles as co-CEOs as part of the deal. Lowy will chair a newly created advisory board.

Under the deal, which has been unanimously recommended by Westfield's board and Unibail's supervisory board, Unibail is offering a combination of cash and shares comprising 0.01844 Unibail stapled security plus US$2.67 in cash for each Westfield security.

The offer translates to a price of US$7.55 per Westfield share, based on Unibail's closing price of €224.10 as at Dec. 11. The deal also represents a premium of 17.8% over Westfield's Dec. 11 closing security price.

Westfield security holders will receive approximately 38.7 million Unibail stapled securities to fund the scrip consideration and a total of US$5.6 billion as cash consideration, resulting in a 65% stock and 35% cash consideration mix.

Following the deal, existing Unibail shareholders will own about 72% of the combined group's stapled securities and Westfield security holders will own roughly 28%.

The combined company's board will consist of a supervisory board and a management board. Unibail Supervisory Board Chairman Colin Dyer will chair the combined group's supervisory board, with two Westfield members, including Westfield co-CEO Peter Lowy, to be appointed to the supervisory board. The merged entity's management board will comprise Unibail CEO Christophe Cuvillier and CFO Jaap Tonckens.

Michael Gutman will step down as president and COO of Westfield, and Elliott Rusanow will vacate his CFO position. The merged group will be headquartered in Paris and Schiphol in the Netherlands, with two regional headquarters in Los Angeles and London.

The Lowy family has entered into a voting agreement under which it will not sell its interest in Westfield during the period of the transaction, and to vote in favor of the transaction in the absence of a superior proposal. Unibail owns a 4.9% economic interest in Westfield securities.

Before the implementation of the transaction, a 90% interest in OneMarket, previously Westfield Retail Solutions, Westfield's retail technology platform, is proposed to be spun off from Westfield into an ASX-listed entity. Westfield will retain the remaining 10% stake in OneMarket, which is expected to hold about US$200 million in cash as at Dec. 31. Steven Lowy will chair the OneMarket Board, with Don Kingsborough at the helm as CEO.

The transaction is expected to close in the first half of 2018, subject to the satisfaction of customary conditions, including Australian court approval and the green light from Unibail shareholders and Westfield security holders.

After the deal wraps up, Unibail shareholders and Westfield security holders will hold Unibail-Rodamco stapled securities, made up of one Unibail share and one share in a newly formed Dutch company, which will hold Westfield's U.S. operations. The new company will be developed into a Dutch real estate investment trust, which will focus on a Dutch investment pipeline.

The new Dutch REIT will have two classes of shares: class A shares held by current Unibail shareholders and Westfield security holders, and class B shares held by Unibail, which will represent a 40% stake in the REIT.

The supervisory board of the new REIT will be chaired by Cuvillier.

The merged entity's stapled securities will be dual listed on Euronext Amsterdam and the Paris bourse. The combined company will also establish a secondary listing on the Australian Securities Exchange to allow former Westfield security holders to trade in its stapled securities locally in the form of CHESS depository interests.

Deutsche Bank and Goldman Sachs are serving as financial advisers to Unibail. Darrois Villey Maillot Brochier, Allens, NautaDutilh, Shearman & Sterling LLP, Clifford Chance Europe LLP and Capstan Avocats are the legal advisers, while Lacourte Raquin Tatar, Loyens & Loeff and Allen & Overy are acting as tax advisers.

Rothschild & Co is acting as lead financial adviser to Westfield, and Jefferies and UBS are acting as joint financial advisers. King & Wood Mallesons, Skadden Arps, Slate, Meagher & Flom LLP and Debevoise & Plimpton LLP are Westfield's legal advisers, and Greenwoods and Herbert Smith Freehills have assumed the role of Australian tax advisers.