California Public Employees’ Retirement System (CalPERS) and Florida State Board of Administration (SBA) have declared that they will support a rebel shareholder group and vote against a proposed rights issue by shopping centre giant Unibail-Rodamco-Westfield (URW) this month.
The Refocus consortium of European investors, which holds a combined 5% stake in URW, welcomed the decision by the two US public pension funds to vote against the proposed €3.5bn rights issue, which forms a central part of URW’s so-called €9bn Reset plan to shore up its balance sheet. It would be the largest equity issuance in US and European REIT history.
CalPERS and Florida SBA will also support the election of Léon Bressler, Susana Gallardo and Xavier Niel to the URW supervisory board at a meeting on 10 November.
Bressler is the former chairman and CEO of URW predecessor Unibail.
Guillaume Poitrinal, another former Unibail CEO who has been publicly critical of the incumbent management’s strategy, commented on Twitter that the decision by the two US pension funds was a “big setback for the Reset plan”.
He said: “These are ‘long-term’ investors who have followed the group for a long time. The Supervisory Board should (finally) listen to shareholders.”
In September, when the Reset plan was announced by URW, group CEO Christophe Cuvillier, said that “uncertainties around the duration of the COVID-19 pandemic” made it prudent to “substantially strengthen our balance sheet, in order to maintain a robust investment-grade credit rating and to ensure flexibility in a world that is unpredictable and requires agility”.
He said the Reset plan was designed “to allow URW to fully embrace the changing retail environment”.
Rebel consortium Refocus, meanwhile, argue that the “severely dilutive rights issue” underpinning the plan is a “misguided act by a management who remain prisoner of a failed strategy that began with the acquisition of Westfield”.
Refocus claims that the company’s existing liquidity and its access to the bond markets means that it is already in a stable position and it has described the proposed rights issue, as “completely unnecessary and highly destructive” to shareholders.
Its principal rationale is that the 2018 purchase of Westfield in Europe and the US was “the wrong acquisition at the wrong time”, with Poitrinal also describing the Westfield purchase as a “huge strategic mistake”.
Refocus proposes that URW should concentrate on re-establishing itself as Europe’s leading prime shopping centre business, by selling its US portfolio and using those proceeds to pay-down debt. This, it believes, will generate superior performance over the long term.
It has called on all shareholders to vote down URW’s proposition. To prevent the €3.5bn rights issue from going ahead, more than one-third of the expressed votes – not considering abstentions and void or blank votes – must be cast against ‘Resolution 1’ at the shareholder meeting.
Peter Papadakos, managing director at Green Street, writing in a research report published last month, said the action by Refocus “could become the most meaningful activist step in European real estate history and has effectively turned the 10 November EGM into a referendum on URW’s management team and supervisory board.”
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