UPDATE 1-Westfield to spin off Australian mall assets

Tue Dec 3, 2013 7:02pm EST

* New Westfield to have $18 bln in international assets

* Australia/NZ retail assets to combine with Westfield Retail Trust

* Westfield, WRT securities have underperformed this year

By Maggie Lu Yueyang

SYDNEY, Dec 4 (Reuters) - Shopping mall giant Westfield Group said on Wednesday it plans to separate its global retail assets from its Australia and New Zealand businesses, which will be merged with Westfield Retail Trust (WRT) to form a new company.

The restructuring comes at a time when traditional Australian retailers are struggling with slowing growth and a shift to online shopping, and will put a clearer focus on the group's mainly U.S. and UK international assets.

"The international portfolio is the only place that they are going to get growth. The Australian market for them is going to be tough and it's getting harder and harder for them to gouge tenants," said Donald Williams, chief investment officer at Platypus Asset Management.

The two new entities - Scentre Group in Australia and New Zealand and Westfield Corp for the international portfolio - will be listed on the ASX and have separate boards and managements, the companies said in a joint statement.

"Westfield's international business and its Australian/NZ business have both grown in scale and quality to the stage where they can now stand on their own," Westfield Chairman Frank Lowy said in a statement.

Both groups will retain the Westfield brand on their shopping centres and Lowy will become chairman of both companies.

The new Westfield Corp will have total assets of $17.6 billion, comprising interests in 44 centres in the United States, the United Kingdom and Europe, including Westfield London and Stratford City in London and Westfield World Trade Center in New York.

The new Scentre Group will have total assets of A$28.5 billion ($26 billion) through its interests in 47 shopping centres in Australia and New Zealand.

The restructure would deliver 5.2 percent accretion to WRT's Funds from Operations (FFO) per security and 2.9 percent accretion per security for WDC for 2014, Westfield said.

"For WDC, that vehicle probably has high return on equity and high growth, and for WRT, it does not look fantastically compelling at this point," said a REIT analyst, who declined to be named.

"For the merged vehicle (Scentre Group), the fundamentals are still pretty soft," he added, noting that it was doubling gearing to get the earnings growth.

Under the proposal, WRT security holders will receive A$285 and 918 securities in the new Scentre Group for every 1,000 WRT securities held, and Westfield holders will receive 1,000 securities in the new Westfield Corp and 1,246 securities in Scentre Group for every 1,000 WDC securities held.

The deal has the unanimous support of the Westfield board and the independent directors of the WRT board, but is subject to security holder approval, expected to be voted on in May next year.

Securities in Westfield and WRT were on a delayed open on Wednesday.

Westfield securities have fallen 1.9 percent so far this year and WRT is down 0.7 percent, both underperforming a 13 percent rise in the benchmark S&P/ASX 200 Index.

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