Unibail Deal to Create Behemoth -- WSJ

By Saabira Chaudhuri and Noemie BisserbeFeaturesDow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 13, 2017).

One of the world's best-known mall operators just agreed to be bought by one of its least-known.

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Westfield Corp. -- the Australian operator of glitzy shopping centers stretching up and down California and across the country to Florida and New York -- said Tuesday it agreed to a $15.7 billion takeover by Paris-based Unibail-Rodamco SE.


Even in its home market of France, Unibail-Rodamco isn't a well-known corporate name. But it is Europe's largest listed landlord. And if it consummates a deal with Westfield, it also will be the world's second-largest mall operator by market capitalization, behind Simon Property Group Inc.

Westfield, run by Australian billionaire Frank Lowy and his sons, created an anomaly in American mall culture -- a name on shopping centers that is almost as recognizable as the shoes and designer clothes sold by the stores inside.

That cachet is what attracted Unibail. It owned 71 shopping centers across Europe as of June 30. Almost every one of them has a different name -- well-known by locals, but carrying very little cross-market recognition.

"For our main assets, it would make sense to use the Westfield brand," said Unibail Chief Executive Christophe Cuvillier. "There's money to be saved by advertising only one brand."

Just like Westfield's properties, Unibail's malls are huge.

The Forum des Halles, in central Paris, packs in 123 stores, 23 restaurants and a cinema. The Mall of Scandinavia in Stockholm houses a cinema and 224 stores and restaurants.

Unibail started in 1968 as a property-leasing company in France, moving into property ownership in the 1990s. Ten years ago, it acquired Dutch rival Rodamco, in a $15 billion all-share deal that made it the giant it is today.

Unibail operates across 11 European countries and focuses on buying large shopping centers in major European cities. It also owns offices, as well as 10 convention and exhibition centers in and around Paris.

The deal is a big bet on U.S. retailing, at a time when online shopping is reshaping the American shopping scene. The pain has been less severe in Europe, partly a reflection of a slower takeup of online shopping in some countries.

Online transactions accounted for 13.9% of U.S. retail sales in 2016, while Europe's online market share was just 8%, according to the Center for Retail Research. But penetration rates vary widely. U.K. online sales made up 16.8% of that country's retail market last year, while Italy's online sales were 3%.

Retailers also didn't expand as aggressively in Europe as they did in the U.S. -- a move that has left them with less of a glut of retail space there. And American brands have tended to be more dependent on selling wares in vast, multi-floor department stores.

Those stores -- often the anchor retailer for many U.S. malls -- have been especially hard-hit by the shift to e-commerce. Macy's Inc. and Sears Holdings Corp., for example, are slashing staff and closing stores

Unibail has a 95% occupancy rate at its malls. Revenue in the first half of 2017 was 670 million euros ($786 million), up 4.1% from the same period last year. Unibail's retail tenants reported sales growth of 2.7% this year through May.

Unibail also has tried to get ahead of the shift in retail. It hosted the first Apple store in continental Europe at its mall in Carrousel du Louvre in Paris, close to a decade ago. More recently, it leased space to Tesla outlets in its shopping centers in Sweden and France.

In 2014, after Westfield's Australian and New Zealand malls were spun off into the Scentre Group, a company listed on the Australian stock exchange, Mr. Cuvillier started exploring a possible takeover. The details of Tuesday's deal came together over the past six weeks.

"Since the split, some people had been thinking about a possible combination," said Mr. Cuvillier. "It took some time."

(END) Dow Jones Newswires

December 13, 2017 02:47 ET (07:47 GMT)