You can certainly rely on the Lowy family’s Westfield Holdings to do two things in the stockmarket.

The first is to hold its hand out for more money to cover its horrid under-performance and poor management decisions, especially in the past four years when it has grabbed well over $9 billion from investors for no gain in the price of the securities and no improvement in trading.

The second is that you can be almost 100% certain that share price-sensitive news about major Westfield moves will leak into the market and turn a well-kept secret into open knowledge, without an official announcement taking place. In fact, it has been behaviour that has verged on contempt for investors and market disclosure rules, especially yesterday.

Some time today, the company will reveal those well-leaked plans (every paper this morning) for a split in its business back to the old structure of Australian assets in one group, with the rest, the under-performing malls in NZ, the US and UK in another structure; asset sales and looking to raise about $3.5 billion (newspaper reports).

It will be the third time since 2007 that the company has held its hand out to investors; the actual total is close to $9.5 billion. It is in fact an very, very expensive bill to pay for the managerial mistakes of the Lowy family.

In 2007, it raised $3 billion, all of which was used to cut debt built up in the free credit days before the GFC. So, the message in 2007  was too much debt, someone (investors) will have to pay for the over borrowing.

In early 2009, it raised $2.9 billion and cut the value of its assets by about $3 billion. (i.e. they were overvalued). The message was “paid too much for the assets and needed someone to pay for the cuts”, that’s investors, otherwise the company might worry its bankers.

Now it’s a split, suggestions of more takeovers here and in the US (why, when the US is a deadweight?) and the sale of about 40%, perhaps a bit more, of its glitzy London Olympic mall due for completion next year. In other words, the message is no performance (Westfield securities have under-performed the market by more than 35% since the present structure was adopted in 2004), so we have to restructure. It’s another Lowy blunder.

In fact, when the securities started trading in mid-2004, they closed the first day at $15.10. They peaked at $23.41 in the pre-GFC days of early 2007. The shares closed yesterday at $12.81, so they have not regained their start price, let alone the peak. This is serial under-performance, so for that reason, it will be interesting to read the spin put on this by the advisers and some of the easy-to-fool business writers.

The GFC and the economic slowdown can’t be blamed for all of this, after all the family-led business expanded into the US and the UK by using cheap credit. It left the mature, low-growth Australian market to ride the debt-driven consumption booms in the US, moves that in the end left the group overweight in America and vulnerable to a turndown, which happened.

Now the Lowy family wants to return to the safe, growing Australian business and use that as the basis for another chance.

Already the likes of Chanticleer in The Australian Financial Review and John Durie in The Australian have commented on the weak performance, the level of debt and the poor security on market sensitive information. Will they go the whole hog and pin the tail on the Lowys for being managerial donkeys?

They are serial under-managers and their various companies have been under-performers. The US trusts were set up to handle the expansion into the huge US market because the claim was it couldn’t be handled involving the Australian and NZ businesses in the same group. In 2003 it was conceded that the structure hadn’t worked and it needed to be folded back into one structure (as the family looked to expand into the UK).

Then the GFC hit, hurting everything everywhere, bar the Australian shopping malls, all 44 of them, which effectively supported the slumping returns (sales and profits) from NZ, especially the US and the emerging UK business, which was basically shut down in 2008-09 bar the Stratford Mall in London and the Olympic centre development.

The Financial Times reported last week that Westfield was negotiating to sell 40% or a bit more of the Olympic Centre to a group of investors and raise about $A1.2 billion. The ASX and ASIC failed to query the company. Westfield opened its $1.2 billion development in Sydney’s CBD last week (which was originally costed at $600 million), and immediately rumours were reported in the media of plans to sell up to half that development. Again no query.

Then Westfield securities went off for a Melbourne Cup day run of their own. They started early, but didn’t finish. After rising 24c, to 1.9% to $12.81, the company asked for trading in its securities to be halted pending a major announcement. By then news had leaked of the proposed split and fund-raising and possible other measures because the investment banks appointed to perform the magic this time had started talking to other brokers.

That suspension request was made at 2.53pm, a few minutes before the Melbourne Cup, which leads to the question why Westfield didn’t ask for the suspension before trading yesterday. That was the logical thing to do.

It’s not the first major initiative from Westfield that has been well-telegraphed. The early-2009 fund-raising and write-down was in the market before the actual announcement, as was the mid-2007 fund raising.

This morning the group’s third-quarter review was revealed before 9 o’clock Australia is still doing better than other parts of the empire, although the US seems to be steadying, but at low levels. But the Australian performance seems to be losing momentum.

Peter Fray

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