The Westfield Group has submitted a ₤585 million (A$1.48 billion) cash bid proposal to acquire Duelguide plc, the company which owns the former London Stock Exchange listed Chelsfield plc.
The proposal is subject to certain pre-conditions that must be satisfied or waived by Westfield, such as a recommendation from the Board of Directors of Duelguide, commitments in respect of at least 50.1% of the Duelguide shares and deep discounted bonds, and satisfactory arrangements for the operation of the pre-emption rights of existing shareholders. The proposal values Duelguide plc at approximately ₤2.2 billion (A$5.5 billion) on an enterprise value basis.
Chelsfield owns one of the UK’s leading shopping centers, Merry Hill near Birmingham, and has an interest in a number of large-scale development projects, including the White City development which, when completed, is expected to be the largest retail center in central London.
Westfield Group Chairman, Mr Frank Lowy, said this bid proposal is a strategic move driven by Westfield’s long-term plans for its UK business.
“The UK shopping center market is under-developed relative to the United States and Australia, and if the bid is successful it would increase Westfield’s presence in the UK substantially,” he said. “Westfield recognises the bid represents a premium price, but we believe we can create significant value through the application of our management and development expertise to the Chelsfield properties.”
This continues Westfield’s approach over many years in Australia, New Zealand and the United States where it has acquired high-quality properties at a premium price and used its skills to generate income and capital growth over time.
The newly merged Westfield Group now has substantial debt capacity and will fund the bid through borrowings which will lift its leverage ratio from 43% to 51.5%. Westfield intends to reduce leverage to around the mid-forties percent level over the next 12-18 months from a combination of the sale of non-core assets in Chelsfield, raising of funds from Chelsfield and Westfield’s current portfolio and ongoing revaluations.
If successful, the acquisition of Duelguide is not expected to have any impact on Westfield Group’s distributions for the periods to 2006, forecast at the time of the recent merger of Westfield entities.
Westfield currently has interests in seven centers in the UK valued at approximately ₤950 million (A$2.4 billion). If the proposed bid is successful, Chelsfield would add interests in a further eight centres and six retail development sites. The acquisition would also increase the value of the Westfield development pipeline by approximately ₤2 billion (A$5.0 billion) over the next 5 to 10 years.
Westfield is making the bid proposal for Duelguide in its own right and is not part of a consortium. Further announcements in relation to any potential offer for Duelguide will be made in due course.