The Westfield Corp Ltd (ASX: WFD) share price traded slightly lower, falling 0.3% to $8.59 after publication of its full year results today. Total income rose 10% to $1,455 million and profit after tax rose 13% to $1,551 million thanks largely to deferred tax gains.
Funds From Operations (FFO), the group's preferred measure of ongoing earnings, rose 2.3% to $707 million, or around 34 cents per security. Distributions rose 1.6% to 25.5 cents per security.
Westfield divides its portfolio into 'Flagship' and 'Regional' malls (which are pretty much what they sound like) with Flagship being the sole focus. Comparable net operating income (NOI) for the whole portfolio grew 2.2%, with Flagship NOI growing 2.7% and Regional NOI growing 0.7%. Specialty sales grew 2% for the year, with Flagship growing 2.7% to $908 per square foot, and Regional sales falling 0.3% to $455 per square foot.
As at December 30, Westfield had net debt of $8.8 billion (38% gearing ratio) and net tangible assets of US$5.11 per share, approximately $6.55 in today's Aussie dollars.
While Westfield made substantial progress on its redevelopments, the overwhelming story is the proposed tie-up between Westfield and Unibail-Rodamco, which will see the latter offering to buy the former in a combined cash & scrip (shares) bid. The bid values Westfield shares at US$7.55, or around A$10 per share. If the bid is approved, the new combined entity will also have a local ASX Chess Depository Interest (CDI) listing in addition to its primary markets in Amsterdam and Paris.
Interestingly, Westfield shares still trade some 20% below the implied value of the deal, suggesting that there may be some doubt it goes ahead. Alternatively, it could reflect uncertainty in the value of the combined entity post-merger. I think it is quite likely that the deal goes ahead, given the unanimous approvals from both Westfield and Unibail-Rodamco boards, and shareholders who intend to continue holding shares should start studying up on Unibail Rodamco SE (EPA: UL). Documentation will be sent to shareholders in April, with a vote to be held later in the first half.
Westfield has a history of creating value with these types of transactions; indeed I was a shareholder prior to the restructuring of Westfield and Westfield Retail Trust (which went on to become Scentre Group (ASX: SCG)) several years ago and did well out of the transaction. We will have further coverage for you when the time comes to vote.
