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Westfield gets the go-ahead for Karrinyup acquisition

The Australian Competition and Consumer Commission (ACCC) has decided that Westfield Group (ASX: WDC) and its affiliate Westfield Retail Trust (ASX: WRT) will be allowed to purchase the Karrinyup Shopping Centre in Perth, on the condition that it also divests its interests in the nearby Innaloo shopping centre.

Westfield has been eager to take full control of the $620 million shopping centre as it would greatly increase its exposure in Perth’s northern suburbs. Whilst it currently maintains an interest in 33% of the mall, superannuation fund UniSuper owns the remainder and AMP Shopping Centres acts as the manager.

Boasting a gross lettable area of 59,000sq metres, the centre is home to David Jones, Myer, Big W and Woolworths stores. Furthermore, with a turnover of $11,500 per square metre in the year to June, it is one of Westfield’s top 10 performers in its Australian portfolio, as reported by The Australian Financial Review.

However, in order to take full control of the centre, Westfield has been told that it must divest in its Innaloo shopping centre – which is located just 3 km from Karrinyup – to a buyer approved by the competition watchdog. The ACCC has maintained a close watch over Westfield’s market power in recent years, and feared that retailers would be charged higher rents should the group be allowed to keep both centres.

Rod Sims, the ACCC chairman, said “(The decision) allows for the establishment of an effective, long-term competitor to Westfield and Westfield Retail Trust in north-west metropolitan Perth if Westfield and Westfield Retail decide to proceed with the proposed acquisition of Karrinyup.”

The Innaloo centre is thought to be worth around $268 million.

Foolish takeaway

In order to strengthen its asset portfolio, Westfield has focused on divesting in weaker performing assets and expanding its better performing assets. As such, the move to take full control over Karrinyup should be seen as a good sign for investors.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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