The drama is by no means over for shareholders of shopping centre giant Westfield Group (ASX: WDC) or its sister trust Westfield Retail Trust (ASX: WRT). Although the controversial merger proposal between the two entities received the backing of two independent experts last month, analysts are still suggesting the deal will need to be altered more in the Trust's favour.
In December, Westfield Group proposed to merge its Australian and New Zealand assets with Westfield Retail Trust to form Scentre Group, while it would take its international centres and spin them off into a separate entity to be known as Westfield Corporation. While the logic behind the deal is widely acknowledged, in that both entities would be able to focus on and fund their own growth stories, it is the deal's technicalities that have the market divided.
While the explanatory memorandum released by Westfield Group last month showed that Westfield Retail shareholders would hold 51.4% of the Scentre vehicle, brokerage firm CLSA has stated they should actually hold 53.2%. Macquarie Equities Research thinks that figure should be even higher at 53.3%. The higher ratio would reduce the amount Westfield Retail would be responsible for paying for the Group's management platform which most analysts had suggested was far too high.
In order to be approved, 75% of shareholders will need to vote in favour of the deal. Despite having received the backing of independent experts KPMG and Grant Samuel & Associates, it is still believed that major shareholders of Westfield Retail will still vote "no" based on the current terms. The vote will go ahead on May 29.
Foolish takeaway
At current prices, both Westfield Group and Westfield Retail Trusts present as good buys. Westfield Retail is trading on a price-book ratio of just 0.9, making it a good buy regardless of the outcome of the deal – particularly with retail conditions improving in Australia.
Westfield Group would also be an excellent addition to your portfolio, even though it's trading on a higher price-book ratio of 1.49. Its exposure to the improving US and UK economies could reap incredible returns for shareholders for years to come.