Why Unibail's (ASX:URW) $15 billion reset plan could come unravelled

After initially tanking on the announcement of its $14.9 billion reset plan, Unibail's share price rocketed higher. Now the plan's in doubt.

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Just over a month ago, on 17 September, Unibail Rodamco Westfield (ASX: URW) released the details of its ambitious reset plan.

In order to reduce its sizeable debt pile, the commercial real estate behemoth's 9 billion euro (AU$14.9 billion) plan includes the intent to complete 4 billion euros worth of office and retail asset sales by the end of 2021.

While that and other parts of the plan remain intact, Unibail's 3.5 billion euro capital raising, which it intends to use to immediately pay down its debt obligations, could be in jeopardy.

As the Australian Financial Review reports, a "group of activist investors, including French telco billionaire Xavier Niel, is determined to derail" the capital raising.

Together the activists hold a 4.1% stake in the company. And they're encouraging other shareholders to vote against the capital raising at the 10 November meeting. Advocating "Refocus not RESET", the group wants to see Unibail sell its US assets rather than issue more shares.

In an online post, the activist group commented: 

URW's problems are primarily a consequence of its acquisition of Westfield in 2018. Since the transaction's announcement on 12 December 2017, the company's share price collapsed 86%… The transaction was the wrong move, at the wrong time and at the wrong price. Moreover, it burdened the company with debt, distracted management and was a gross misallocation of resources… Consequently, URW entered the Covid-19 pandemic and ensuing crisis in a weakened and vulnerable position. It has since been disproportionately affected.

What does Unibail Rodamco Westfield do?

Unibail counts among Europe's largest commercial real estate companies, owning retail and office complexes. It has assets in Europe, the United Kingdom and the United States of America.

Unibail acquired Australian shopping centre operator Westfield Corporation, created by the split of Westfield Group, in 2018. This saw Unibail shares first listing on the S&P/ASX 200 Index (ASX: XJO).

How has Unibail's share price responded since it announced the reset plan?

On the day it announced the reset plan, Unibail's share price slid to 52-week lows. And it kept on sliding, losing 20% from 17 September through to 2 October.

Since then the share price has turned around sharply, up more than 38%. That puts the share price up 5% from where it was on 16 September, the day before the reset plan was released.

With that in mind, the French activist investors may find less support from Unibail Rodamco's other shareholders to block the planned capital raising than they're hoping.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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