Frank Lowy’s Westfield Retail Trust Reorganization Plan Just Squeaks Through At Second Attempt

 

 

 

Frank Lowy,    Westfield

 

Yesterday, at a special shareholders meeting, shareholders of the Australian publicly listed real estate investment trust, the Westfield Retail Trust, finally agreed by a majority of just under 76% to approve a massive corporate reorganization, and to rename itself afterwards Scentre Group. The vote was touch and go right down to the wire, and just crossed the required 75% vote for it to be implemented under Asutralian corporate laws.

Just two weeks earlier, Richard Warburton, the Chairman of a special shareholders meeting of the same Trust, called for the same purpose, used a technicality to postpone for two weeks the vote by shareholders on the same proposal to reorganize the company. Under the reorganization plan tabled at that first meeting the Retail Trust was to absorb many Australian and New Zealand shopping centre properties, which were to be transferred over from its affiliated company the Westfield Group, together with associated property specific debt and members of some related management teams.

Richard Warburgton had adjourned the meeting when it had become clear to the conveners of the meeting that founding entrepreneur Frank Lowy’s plan, which had been many months in the making, and was both radical in scope and complex in its implementation, was going to fall just short of the 75% vote needed for the reorganization to pass after several institutional shareholders had balked publicly at some of the critical details of the plan.

Earlier the same day, Frank Lowy’s other, affiliated, shopping centre development company, the Westfield Group, had itself approved the same reorganization plan at its own special shareholders meeting called for the purpose. The idea behind the plan was for the Westfield Group, to be renamed simply Westfield Corporation, would focus on becoming an international powerhouse in development of trophy properties, such as at the new World Trade Center in New York, while the retail trust, to be renamed Scentre Group, would concentrate primarily on more mature domestic Australian and New Zealand mall properties.

Frank Lowy had also told his own shareholders that day that his plan for hiving off of its domestic assets would go ahead even if the Retail Trust rejected taking them. It also confirmed this to the Australian securities regulators the evening before both shareholders meetings. As this was not publicly disclosed in time for the meeting of the retail trust, this gave the chairman of the meeting of the Retail Trust a valid legal excuse to postpone the vote rather than face imminent defeat.

As it has turned out this was a very smart move, giving Frank Lowy time to do what he loves best, playing hard ball and jaw-boning his opponents into submission. This time, as it has many times in the past, it again has clearly worked and the new vote took the plan over the top.

Looking ahead Frank Lowy will become Chairman of both new companies. However his two sons Peter Lowy and Steven Lowy, who are currently co-CEOs of the Westfield Group will stay on in their same roles running the international business, now newly re-named Westfield Corporation. The existing Westfield Group CFO Peter Allen, will however move over and become CEO of Scentre Group, to take that company forward.

Frank Lowy declared his satisfaction after the vote saying, “Achieving a 75% ‘yes’ vote was a high hurdle but we were always confident of the intrinsic strategic merit and fairness of the proposal to both entities and we now look forward to the creation of what will be two new, great companies, ”

Peter Lowy said after the meeting, the swapping around of some of their management teams that goes with the new plan is a sign of the strength of the Australian business, adding:

“The maturity of the company is shown and the growth of the company is shown when we can move out of those executive roles and have the people that have worked with us for a really long time move into it, ” adding, “I think it’s a very positive thing for public companies, I think it’s a very positive thing for people who work at the company, and I think it’s a very positive thing for the shareholders.”

At least now the uncertainties are out of the way and everyone can get on with trying to make it all work now on the ground. With a combined market capitalization of about US$30 billion, two thirds coming from the existing Westfield Group and one third from the current Westfield Retail Trust, the two companies represent a huge amount of value. Frank Lowy’s gamble is that, as Westfield Corporation and Scentre Group that value will be enhanced. If he delivers on that promise the current “little local difficulties” will soon be forgotten.

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