Investors in both Westfield Group (ASX: WDC) and Westfield Retail Trust (ASX: WRT) may have to wait a few more weeks than anticipated for the group’s explanatory memorandum regarding its proposed merger, with the financial watchdog said to be wanting more time to review the transaction.
Under the proposal, the Group’s Australian and New Zealand assets would be merged with the Trust to form a new company known as Scentre Group, while its international assets would be spun off into yet another new entity to be known as Westfield Corporation. Indeed, it is a complex proposal that has had investors and analysts alike trying to grasp its full implications where even explanations from Peter Allen, the group’s CFO, have failed to persuade investors.
While the market was promised an explanatory memorandum to be released from late March to the start of April, it is understood that the Australian Securities and Investments Commission (ASIC) wants to extend the deadline of its release to gain a better understanding of the deal, which could see the voting date moved to the end of May.
Although there is logic behind the deal, in that both entities would be able to focus on their own funding and growth stories, a large proportion of WRT investors are considering opposing the deal based on its sheer costs. The current deal would have WRT pay roughly $1.8 billion for the management and development rights.
In order to have the deal approved, the Lowy family (the family behind Westfield Group) will likely have to sweeten the deal for WRT shareholders, which could involve an adjustment of the merger ratio. This could reduce the costs being recognised by WRT by around $600 million.
Westfield Group and Westfield Retail Trust have heavily underperformed the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) over the last 12 months and are both sitting at attractive prices today. The Group is trading at $10.18 a share and offers a trailing 5% dividend yield while the Trust is priced at $3.06 a share with a dividend yield of 6.3%.