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Westfield restructure: What investors need to know

The Lowy family’s proposal to restructure Westfield Group (ASX: WDC) and Westfield Retail Trust (ASX: WRT) comes to a head today, with a series of investor meetings.

Based on media reports though, the proposal could be defeated, with more than 20% of shareholders understood to have voted against the deal already. The Lowy family needs 75% of shareholders to vote for the deal, for it to go ahead.

If you aren’t sure what is happening in the restructure here’s the details…

  • Westfield Group currently jointly owns the group’s Australian and New Zealand property assets with the Retail Trust. The proposal will see all these Australasian assets combined to form a new company called Scentre Group.
  • Westfield Group will take over the group’s international operations, and be known as Westfield Corporation.

While that makes plenty of sense, many shareholders are opposed to the deal, including the Australian Shareholders Association (ASA). The ASA says the Lowy family’s decision to sell its $665 million stake in the Retail Trust just a few months ago, a unfair deal for Retail Trust shareholders, and an almost doubling of the debt ratio from 22.4% of assets to 37.3% of assets in Scentre, make the deal unpalatable for Retail Trust shareholders.

John Durie, in The Australian, writes that the deal is being done for family rather than economically rational reasons, and says debt in Scentre will rise from $2.9 billion to $12.2 billion, while assets will increase from $13.7 billion to $28.6 billion.

The ASA is also concerned that Westfield is paying investment banks a combined $70 million to advise on the deal, and the new Scentre group will be a more riskier proposition than the Retail Trust – not to mention that the restructure will cost Westfield shareholders $520 million.

The Lowy’s may have realised the terms of the restructure was unfair, and have reduced the net debt in Scentre Group by $300 million (after two independent advisors and two proxy advisors had supported the plan).

The vote will probably go down to the wire today, but it would be a big blow for the Lowys if the deal was defeated.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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