Two Australian property groups are merging to create a massive $11 billion real estate investment trust

Shoppers stream through Sydney’s Pitt Street Mall. Cole Bennetts/Getty Images

Novion Property Group and Federation Centres plan to merge and create Australia’s third-largest listed real estate investment trust.

The new entity, with a market capitalisation of about $11 billion, would have $22 billion in assets under management and be better positioned to compete with bigger players such as Westfield.

It would be one of the largest retail landlords in Australia, with more 500 million annual customer visits to more than 9,500 retail shops over 3 million square metres of lettable area.

The merger, supported by both boards of directors, is expected to result in a total cost savings of at least $84 million a year.

Steven Sewell, the current CEO of Federation, will become the head of the merged group.

In the merger, each Novion security will be exchanged for 0.8225 Federation securities, implying a current Novion value of $2.55 per security.

Today Novion securities are trading up 9.7% to $2.545.

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