Frank Lowy’s Westfield threat makes corporate history

Frank Lowy’s Westfield threat makes corporate history

May 29, 2014 – 6:07PM

Malcolm Maiden

Lowy blow as Westfield defers restructure vote

The final vote for Westfield’s restructure has been deferred after proxy votes fell just shy of the 75 per cent needed, in a blow to the Lowy family’s plans to restructure the department store giant.

Westfield Group chairman Frank Lowy’s warning on Thursday morning that Westfield would independently split into separate Australian and international companies if the Westfield-managed Westfield Retail Trust voted down its more sweeping $70 billion restructure plan has resulted in Australian corporate history, with Westfield Retail Trust chairman Dick Warburton suspending WRT’s meeting mid-stream.

Mr Warburton told the meeting on Thursday afternoon that the WRT board believed that Mr Lowy’s warning, issued to a meeting of Westfield Group on Thursday morning, was a ”material change”.

He then consulted briefly with his fellow independent directors, conducted a show of hands poll that supported an adjournment, and announced that the meeting had been adjourned to a date to be fixed.

Proxy votes lodged ahead of the meeting indicated that WRT was not going to approve its participation in the restructure.

Mr Warburton had told the meeting that 74.1 per cent of the votes had been cast in favour. A vote of at least 75 per cent is needed, and there did not appear to be enough votes on the floor of the meeting in Sydney to clear the 75 per cent hurdle.

Asked earlier by Australian Shareholders Association representative Stephen Mayne whether he would try and negotiate a new, improved deal with Westfield Group if WRT shareholders voted the $70 billion restructuring proposal down, Mr Warburton said the board had negotiated hard for the best terms.

Board member Steven Lowy then said that Westfield Group chairman Frank Lowy had told a Westfield Group’s meeting of shareholders that approved the restructure plan on Thursday morning that Westfield Group intended to split itself into separate Australian and international companies regardless of whether WRT voted the deal down. There was no opportunity for the deal to be renegotiated, he said.

The restructure as originally proposed would see Westfield Group’s Australian and New Zealand shopping centres and related businesses separated from its international ones, and combined with the separately listed Westfield Retail Trust (WRT) to form a new internally managed Australian retail property group, Scentre Group.

Westfield Group would become Westfield Corporation, and own an internally managed portfolio of shopping centres in the United States, the United Kingdom and Europe, including the new World Trade Centre shopping complex in New York.

Documents explaining the proposal had listed several possible scenarios if WRT did not back the plan.

They included Westfield Group spinning off its Australian assets into the new company, Scentre but stopping short of also merging Scentre with WRT, but also included other options, including a renegotiation of the restructure terms.

Tense discussions occurred at Westfield Group’s meeting on Thursday morning after Mr Lowy told the meeting that if Westfield Retail Trust investors did not approve the restructure Westfield Group could restructure on its own, separating itself into separate domestic businesses.

Mr Mayne criticised Mr Lowy for announcing that Westfield Group could go it alone. The announcement was precipitous, a ‘‘strong arm tactic’’  and pressured Westfield Retail trust investors ahead of their meeting, he said, adding that My Lowy and his family only controlled 8 per cent of Westfield.

Scheme documents outlined options in the case of the restructure being voted down including new discussions about a revised restructuring plan. The best option was to consult and ‘‘recut the deal,’’ Mr Mayne asserted.

Mr Lowy said however that Westfield Group’s board had meet on Tuesday and again on Wednesday, and had unanimously ‘‘asked us to pursue the option I have just outlined.’’

Mr Mayne was ‘‘in dreamland’’ to suggest that the process was being run ‘‘in some oppressive way,’’ he said. The board’s behaviour was ‘‘proper, businesslike. We make decisions according to what is expected of us,’’ he added.

‘‘Alright. Calm down Frank, and get on with the job,’’ Mr Lowy said before moving to call for votes that cleared Westfield Group’s part of the ambitious restructuring plan.

Mr Warburton told the WRT meeting that he expected to reconvene the meeting within 2 weeks, but the situation is fluid, with legal challenges possible.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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