Although it is well known that UniSuper is against the proposed merger between Westfield Group (ASX: WDC) and Westfield Retail Trust (ASX: WRT) based on today’s terms, the fund manager has increased its stake in the Trust from 7.27% to 8.49%.
The move could be an indication that UniSuper still expects the explanatory memorandum (which is due by April 20) to include a sweetened deal more in favour of Westfield Retail Trust, despite Bank of America Merrill Lynch (BoAML) suggesting the chances of that happening are fading. BoAML believes that given the memorandum has already been submitted to ASIC and the company welcomed no discussion on the proposal when they held their investor day last week, the deal’s current terms will remain unchanged.
The controversial deal would see the Group’s local assets merged with those of Westfield Retail Trust to form Scentre Group, which would have Westfield Retail Trust responsible for paying roughly $1.8 billion for the Group’s management platform. Most investors appear to believe that this is far too high a price with many suggesting they will not vote in favour of the proposal unless that figure is dropped substantially.
Should the deal remain unchanged, UniSuper will almost certainly vote “No” which would make it difficult to achieve the required 75% approval rate.
At today’s prices, both companies are looking attractive. Westfield Group is trading at $10.42 and offers a 5% dividend yield, while Westfield Retail Trust is hovering just above $3 a share, yielding an even more attractive 6.7% yield.
However, despite the strength of their local assets, the Group would be a more attractive investment prospect given its exposure to the recovering US and UK markets. It is undertaking significant redevelopments of some of its biggest stores, including Westfield London, Croydon (in London’s south) as well as the World Trade Centre mall in New York, which should all prove to be very strong performers over the coming years.