Australian mall owner Westfield Group has made peace with Anglo-French developer Hammerson in a long-running battle over an ageing south London shopping centre, agreeing to redevelop it together.

The two have been wrangling for over a year about the Whitgift Centre in Croydon whose owners sided with both developers on the right to redevelop the site, resulting in deadlock.

The pair said on Thursday that the joint venture will purchase a 25 percent interest in the 42-year-old site.

Hammerson had previously agreed to buy the stake from one of the centre's leaseholders, Royal London Asset Management (RLAM), on its own for 65 million pounds ($104 million).

Westfield will also buy a 50 percent stake in the Centrale shopping centre, a mall opposite the Whitgift Centre which Hammerson already owns.

"Croydon has huge potential to return to its former glory as one of London's most vibrant town centres, and a major driver of its economy. The redevelopment of the Whitgift Centre at its heart is crucial to this vision," London's Mayor Boris Johnson said in the statement.

Large British shopping centres that dominate surrounding areas are highly prized by property investors as they have so far weathered the tough retailing climate better than others.

Westfield, whose Stratford City mall near the Olympic Park was one of the biggest retail winners during the Games, said in November the 1.2 million square foot site in Croydon would become its third large London centre after an exclusive deal with the Whitgift Foundation, the freeholder and 25 percent leaseholder.

But RLAM and Irish Bank Resolution Corp (IBRC), which together owned 75 percent of the mall's lease, said in April they had signed an exclusive agreement with Hammerson.

Hammerson and Westfield have set up a joint management company and will meet with all stakeholders in the coming weeks and will create a revised masterplan. Planning consent could be secured in 2013 with construction expected to start in 2015 for the 1 billion pound scheme, they said.