Unibail-Rodamco eyes takeover of Westfield - rumours

Listed European property giant Unibail-Rodamco is rumoured to be looking for a new takeover target, with Australian shopping centre giant Westfield cited as the most obvious candidate.

According to merchant bank Kempen & Co, Unibail-Rodamco may be hard put to achieve its targeted earnings growth of 5-7% a year exclusively from organic growth.

Unibail-Rodamco, which was formed from a merger in 2007 between French company Unibail and Rodamco Europe of the Netherlands, expanded to Germany in 2012 through the acquisition of a controlling stake in shopping centre owner Mfi and most recently achieved growth through impressive rises in rental income.

But as rents rise and the portfolio matures, the goal of further growth is becoming harder for Europe's largest listed property owner to achieve, Kempen & Co said.

According to Boudewijn Schoon, an analyst at the bank, the highest rent levels have already been squeezed out of most of the group's retailers, leaving little space for aggressive rises in the future.

To accelerate growth, Unibail may also seek to launch new shopping centre developments. 'But that's not nearly as easy as in 2007,' Schoon said. 'Recently opened centres like Aeroville to the north of Paris seem to have struggled to develop into strong shopping destinations. This is partly due to the stagnant market with increasing competition, including the internet.'

To keep up the pace of growth, Unibail-Rodamco may rely on mergers and acquisitions only, the analyst added, pointing to the recent merger between Klépierre and Corio which has shaken up the industry. 'I think there's quite some pressure on Unibail's management to do something in that direction.'

Westfield, a $28 bn owner with activities largely concentrated in Australia and the US, is the merger candidate most mentioned by Unibail's shareholders, according to Schoon, who stresses that there is no concrete indication that the group is already engaged in takeover negotiations.

'It's a good match. They focus on the same type of major shopping centres and would provide Unibail-Rodamco with access to the US. That makes the company a major international player.'

However, the question is how much value Unibail-Rodamco and Westfield can add to one another, he added. In terms of value, both companies are trading at a premium, giving sense to a potential share swap.

Westfield, which has entered Europe in the past couple of years with giant projects in London and in Milan, is known to have been looking to enter France more than once and in 2011 was linked to the massive Uplace Machelen project in Brussels.

In France, the Australian shopping centre group has held talks with Immochan, a ­subsidiary of supermarket chain Auchan, to develop a €400 mln mall in the Plaine du Var near Nice. Klépierre has also been mentioned as competing for the ­contract.