Liberty in merger talks to form world's largest mall group

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The Independent Online

Talks are taking place that may see Liberty International, the FTSE 100 property group that owns London's Covent Garden, team up with a major rival to become the world's largest shopping mall group.

Australia's Westfield Group, which has had a long-standing interest in the UK company, and GIC Real Estate, the property arm of Singapore's sovereign wealth fund, have been mooted as potential suitors.

A source close to the negotiations said talks had occurred, although Liberty may not yet have been approached. The source declined to name the interested party, but added that it was an international company bigger than Liberty.

Liberty's life president, Sir Donald Gordon, is understood to hold the key. His family holds a 21 per cent stake in the group and until his retirement as chairman in June 2005, he was resistant to a sale. Since stepping down, Sir Donald could have become more willing to countenance a deal. A merger is believed to be more preferable than an outright sale after the share price fell from 1,396p at the beginning of 2007 to 943p yesterday.

GIC declared a 3 per cent stake in the group in early January. The shareholder register currently shows it has increased that holding to 5 per cent. Liberty already had links with the Singapore fund after it signed a strategic partnership over the MetroCentre, the shopping centre in Gateshead. GIC agreed with Liberty's subsidiary Capital Shopping Centres to buy a 40 per cent stake in the largest mall in the European Union.

At the time, Sir Robert Finch, the chairman of Liberty International, said: "We firmly believe that GIC Real Estate holds similar investment values to Liberty International and we look forward to working with it closely in the future."

GIC Real Estate's shopping mall portfolio includes investments in Bluewater Shopping Centre in Kent, Romaest in Rome, Sunway Pyramid Mall in Malaysia and Queen Victoria Building in Australia.

Another name mooted yesterday was Westfield, the world's largest owner of shopping centres, which is run by Frank Lowy, Australia's second-richest man. The company is believed to have considered a bid for Liberty in 2004 and analysts at Merrill Lynch last year said Westfield was looking at rivals hit by the property slump and named the UK group as a possible target.

One analyst who focuses on shopping centres said: "Westfield by nature is an acquisitive, aggressive company. They have shaken up the market-place in the UK already. Liberty would put them in a great position."

Liberty has a market value of £3.41bn and property investments of £8.6bn, of which UK regional shopping centres comprise 75 per cent. Assets of the group under control or joint control amount to £11.0bn.

Liberty was launched in the UK in 1980, as an arm of South African financial services company Liberty Life Association of Africa, founded by Sir Donald in 1958. The company, which listed in London in 1992, converted into a real-estate investment trust in January last year.

The group has stakes in the Lakeside, Thurrock, the Victoria Centre, Nottingham, the Manchester Arndale and the mall at Cribbs Causeway in Bristol. It bought Covent Garden for £421m in 2006. Last month, Liberty reported a full-year loss of £105m in a difficult year for property stocks. Its net asset value had fallen to 1,264p per share at the end of 2007.

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