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KingSett-led consortium makes $4.4bn offer for Primaris

A consortium including Toronto-based KingSett Capital and the Ontario Pension Board has offered to buy the Canadian shopping centre REIT for $26 per share. Primaris is calling the offer “unsolicited” and “inadequate” and urging shareholders not to sell.


A consortium of Canadian institutional real estate investors has made an offer to purchase a Canadian shopping centre REIT in a transaction valued at approximately $4.4 billion. The REIT, however, is calling the offer “inadequate” and urging its stockholders to not sell their shares. 

The consortium – including Toronto-based private equity real estate firm KingSett Capital and the Ontario Pension Board, which oversees Canada’s Public Service Pension Plan – has made an all-cash offer to buy all of the issued and outstanding trust units of Primaris Retail Real Estate Investment Trust at a price of $26 per share in cash. The total transaction is valued at $4.4 billion.

The offer price represents a premium of approximately 12.8 percent to the REIT’s closing price of $23.04 per share on the Toronto Stock Exchange on 4 December 2012 and a premium of 13.3 percent to the volume weighted average trading price of $22.95 per share over the 20 trading days on the exchange up to and including 4 December. 
   
If the deal goes through, Canadian retail REIT RioCan Real Estate Investment Trust has agreed to purchase some of Primaris’ properties from the consortium for approximately $1.1 billion. Other supporters of the possible takeover include Alberta Investment Management and Ivanhoé Cambridge.

KingSett Capital managing partner Jon Love said in a statement: “The all-cash offer provides Primaris’ unit holders with an attractive opportunity to obtain immediate liquidity in the face of economic uncertainty and volatile markets.”

Ontario Pension Board chief executive officer Mark Fuller added that the deal offers “significant and immediate value to Primaris’ unit holders.” In addition, it is aligned with the board’s strategy to increase its “exposure to private market investments, such as real estate, private equity and infrastructure, by partnering with institutions.” 

Primaris, however, is calling the bid “unsolicited” and “wholly inadequate.” A statement issued by the REIT on Wednesday said that its board has formed a committee of independent trustees “to consider and evaluate the unsolicited takeover bid” made by the consortium.

“The board's preliminary view is that the unsolicited offer is wholly inadequate and undervalues Primaris,” according to Primaris’ statement. 

Although Primaris’ board intends to thoroughly review the consortium’s offer and make a recommendation to shareholders by 24 December, the REIT’s shareholders are for now “strongly urged to take no action and not tender their units to KingSett Capital's offer.”

Primaris specialises in owning and operating Canadian enclosed shopping centres. It owns 35 income-producing properties comprising approximately 14.7 million square feet in Canada.