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Westfield terminates Innaloo put option

Although many expected it to be cancelled as soon as the bidding war for Karrinyup Shopping Centre was lost, Westfield Group (ASX: WDC) and its affiliate Westfield Retail Trust (ASX: WRT) (together “Westfield”) have now terminated the put option granted to Charter Hall (ASX: CHC) to acquire the Innaloo Shopping Centre, located in Perth.

For a number of years, Westfield sought permission from the Australian Competition and Consumer Commission (ACCC) to buy and take control of the Karrinyup centre. Permission was granted, but on the condition that Westfield would sell its nearby Innaloo centre should it buy Karrinyup, due to concerns that owning the two stores would compromise competition levels within the area.

As such, the put option was created just prior to the final sale negotiations for Karrinyup, whereby Charter Hall would unconditionally purchase Innaloo should Westfield have proceeded with the acquisition.

Having lost the bidding war to UniSuper however, Westfield took its time to review its position within the region and has decided to terminate the put option.

It is expected that the group will now expand and redevelop the Innaloo centre in order to compete with the much larger Karrinyup. Given the store’s exposure to the wealthy northern suburbs of Perth, this decision could create significantly higher cash inflows.

Foolish takeaway

Shares in Westfield Group are currently trading at a very attractive value of just $10.90 each – a significant discount from their highs earlier in the year – and now could be a perfect time to add the company to your portfolio.

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

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