Westfield's Steven Lowy Says Buyout Offers Good for Retailers

Leveraged buyouts of retailers including Neiman Marcus Group Inc. and Coles Group Ltd.'s department stores in Australia improved the companies and increased sales growth at malls worldwide, Westfield Group's Steven Lowy said.

"We've seen a lot of private equity move into retailers who are our customers, and that's been good for the business,'' Lowy, managing director of the world's biggest shopping mall owner, said in an interview at his Sydney office today. "It's actually been a very good thing for those businesses because they've been very focused in what they want to achieve.''

Buyout firms such as Texas Pacific Group have targeted underperforming companies including Dallas-based luxury fashion- store owner Neiman Marcus and Melbourne-based Coles, Australia's second-largest retailer. The firms seek to improve profits before selling the companies within five years to other funds or through initial public offerings.

Neiman Marcus, bought by Texas Pacific and Warburg Pincus LLC in 2005, increased operating earnings by 47 percent to $154.3 million in the three months through Oct. 28.

Texas Pacific last year bought Coles' Myer chain, Australia's biggest department store group, which lagged behind smaller rival David Jones Ltd. in profits, positioning it to target customers who won't shop at the designer-brand focused competitor.

``The sale of Myer was a very good thing for the investors into the new Myer, and it's been a good thing for the industry because it has rejuvenated the business,'' Lowy said. ``It's been good for Myer, David Jones continues to do very well, and probably the consumer is doing much better from it because it has two very focused department store groups.''

Takeover Target

Westfield was ``seeing an increase in sales taking place in that business with new owners, new management,'' he told analysts in Sydney today.

Buyout firms announced a record of more than $700 billion in takeovers worldwide last year, and almost $50 billion so far this year, according to data compiled by Bloomberg. There were $16.9 billion in retail buyouts announced in 2006, Bloomberg data shows.

Buyout firms typically finance two-thirds of an acquisition with debt by borrowing against a target's assets.

Coles last week put itself up for sale four months after rejecting a A$18.2 billion ($14.4 billion) offer by a group led by Kohlberg, Kravis Roberts & Co.

A KKR-led group has had discussions with Coles' advisers since November, and a second group comprising Cerberus Capital Management Ltd., Permira Holdings Ltd. and CCMP Capital Asia may also make an offer, three people with knowledge of the matter said Feb. 23.

Sainsbury

J Sainsbury Plc, the U.K.'s third biggest grocer, may face a leveraged buyout after Blackstone Group LP, Kohlberg Kravis Roberts & Co. and CVC Capital Partners Ltd. said Feb. 2 they were in the ``preliminary stages'' of assessing an offer.

Lowy declined to comment on whether Westfield itself could become a takeover target after Blackstone Group LP's record $39 billion purchase of Chicago-based Equity Office Properties Trust this month. Shares of Westfield have gained 5.3 percent this year, almost double the 2.7 percent gain of the Australia's property trust index, amid speculation of more takeovers.

The buyout in the U.S. was ``probably a watershed in terms of size of a transaction,'' he said. ``How that relates to us or the rest of the industry is yet to play out.''

Source: bloomberg.com