Woolworths Ltd on Friday revealed plans of spinning off its existing shopping centre assets into a real estate investment trust to maximise shareholder value, along with the intention to knock on investors for $506 million to help fund and push the deal.
To be called Shopping Centres Australasia Property Group (SCA Property Group), the trust will take in all its 69 prevailing shopping centers across Australia and New Zealand, each valued between A$4 million and A$90 million, respectively, Australia's biggest supermarket chain said in a statement to the Australian Securities Exchange.
Further, the SCA Property Group will be established through an in-specie distribution to Woolworths shareholders.
The centres turned over to the trust have been independently valued at $1.406 billion, Woolworths said.
The company rationalised the move is needed to enable it to focus on its main strength, which is retail business.
"All but one of the properties have been developed or redeveloped by Woolworths and a Woolworths Group business is the anchor tenant for each property," the company said.
Woolworths said the move would reduce the amount of property held on its balance sheet and help it focus on its core retail business.
"It's a good thing for Woolworths' shareholders," portfolio expert Simon Bonouvrie told CNBC.
"They have spent a significant amount on property development over the past several years and arguably they are not a natural property owner. So it's good that they can sell some property assets and recycle the capital back into their retailing business," he said, adding part of the funds may be utilised to pay down debt and open more stores.
Under the plan, shareholders will get one stapled unit in SCA for every five Woolworths shares they own on November 30.
Operating brands such as discount retailer Big W, liquor chain Dan Murphy's and Masters Home Improvement, and the SCA Property Group will undertake a public offer of the remaining 337.3 million stapled units in the hope to gather between $425 million and $506 million which will be used to partially fund the acquisition of the shopping centres.
"Woolworths will not acquire stapled units under the offer," Woolworths Chief Executive Grant O'Brien said in a statement.
"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," he 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."
The company likewise maintained it will have no ownership interest in SCA Property Group one the distribution and offer have been completed and finalized.
"SCA Property Group will be an independent entity with its own board and management team."
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