The deal accelerates consolidation of the global retail property sector as it grapples with challenges from online retailers led by Amazon.com. It comes on the heels of world No. 2 retail real estate investment trust GGP's rejection of a $14.8 billion offer from Brookfield Property for the two-thirds it did not already own.
Westfield, which owns and operates 35 shopping centers in the United States and United Kingdom valued at $32 billion, said the transaction was "highly compelling" for Westfield and Unibail-Rodamco's shareholders.
"Unibail-Rodamco's track record makes it the natural home for the legacy of Westfield's brand and business," Westfield Chairman and co-founder Frank Lowy said in a statement.
Unibail-Rodamco said Westfield shareholders would receive a combination of cash and shares, valuing Westfield at $7.55, or A$10.01 a share, an 18 percent premium to Westfield's last trade.
Including debt, the deal would be worth $24.7 billion.
Unibail-Rodamco said the deal would create a global property leader with $72 billion of gross market value in 27 retail markets. It will rebadge its malls with the red Westfield logo.
Shopping center owners around the world are scrambling to reinvent themselves to keep up with rapid changes in consumer behavior and boost earnings.
The expansion of e-commerce giant Amazon.com has coincided with an explosion in online purchases of physical goods, while consumers increasingly treat malls as places for socializing.
Once dominant United States department store operators such as Macy's and J.C. Penney have announced plans to shut hundreds of stores in recent years, putting pressure on landlords to find new "anchor tenants" or come up with new ways to grow returns.
Westfield has been seen as a pioneer in U.S. mall redevelopment, melding traditional mall retailers with atypical mall fixtures like upscale food courts, high-end restaurants, bars, cinemas and boutique fashion outlets.
"Westfield has got assets in the U.K. and in the U.S. that are all in mature Amazon markets. They're already 50 percent through that online retail switch," said Morningstar analyst Tony Sherlock.
Chairman Lowy, a holocaust survivor-turned-knighted property billionaire, will retire from the company he co-founded in 1960, and his sons Steven and Peter, will retire from their positions as co-chief executives.
"This is obviously a day of mixed emotions for me although I am 100 percent comfortable with our decision," Frank Lowy told reporters in Sydney via video conference from London. He said talks to seal a deal had taken just six weeks.
Lowy said it made sense to sell now because it was a "very good price" for shareholders, but acknowledged that the sale partly reflected the global trend of consolidation and the pressures on retailers.
"It seems like a good strategic rationale, given the synergies, and it will create the leading mall operator globally," said Sydney-based CLSA analyst Sholto Maconochie.
"With a A$10 handle in front, the offer doesn't look bad," he said, adding that he was still evaluating the deal.
The offer price closed the gap between the underlying value of the company and its share price, Peter Lowy said.
The Lowys said they also chose to sell as they would rather be investors than executives now, after putting in a combined 145 years at the company.
Westfield's flagship malls include Westfield London, where it is working on a 600,000 pound ($800,000) expansion, and Century City in Los Angeles, where it is completing a $1 billion overhaul.
It also has stakes in 18 suburban U.S. shopping centers, three of which it wholly owns.
Shares in Westfield were halted earlier on Tuesday pending the announcement, having last traded at A$8.50.