Woolworths to spin off property into $1.4bn trust
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Nicholas Grove is a Morningstar journalist.
Woolworths (WOW) on Friday said it plans to spin out its 69 Australian and New Zealand shopping centres into a $1.4-billion real estate investment trust (REIT), to be known as Shopping Centres Australasia Property Group (SCA Property Group).
The company said the decision is in line with its strategy to maximise shareholder value and will be put to a shareholder vote at the company's annual general meeting on 22 November 2012.
"Woolworths has determined that creating SCA Property Group is the best option to reduce the quantum of property held on the Woolworths balance sheet, make better use of Woolworths' capital, and release value to shareholders," Woolworths CEO Grant O'Brien said in a statement.
"We are focused on growing earnings from our core retail business. Reducing the capital invested in property will allow Woolworths to focus on other growth options."
SCA Property Group will be created via an in-specie distribution to Woolworths shareholders and related offer to investors.
The financial impact is not expected to be material due to the relatively small size of SCA Property Group when compared to the company's total business, Woolworths said.
Woolworths shareholders will receive one stapled unit in SCA Property Group for every five Woolworths shares held as at 30 November 2012.
In addition to the distribution, SCA Property Group is undertaking a public offer of 337.3 million stapled units to raise between $425 million and $506 million, which will be used to partially fund the acquisition of the portfolio.
Woolworths said it will not acquire stapled units under the offer and will have no ownership interest in SCA Property Group following completion of the distribution and the offer.
SCA Property Group will be an independent entity with its own board and management team, Woolworths said.
Philip Clark will be chairman of SCA Property Group, while Anthony Mellowes, the current head of asset management and group property operations at Woolworths, will become chief executive officer of SCA Property Group on an interim basis.
Assuming approval of the resolution, SCA Property Group is scheduled to commence trading on the Australian Securities Exchange (ASX) on 26 November 2012.