KingSett leads unsolicited $2.6 billion bid for Primaris

Wed Dec 5, 2012 6:31pm EST
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By Euan Rocha

TORONTO (Reuters) - A consortium led by Canada's KingSett Capital will offer about C$2.6 billion ($2.62 billion) to acquire Primaris Retail REIT PMZ_u.TO to bolster its portfolio of Canadian shopping malls at a time when U.S. retailers are looking to expand northward.

The unsolicited offer, announced by the private equity firm on Wednesday, would give KingSett control of mid-market retail centers in major cities across Canada and dominant shopping malls in secondary cities. The Ontario Pension Board is one of the consortium's members.

The consortium, which includes the Ontario Pension Board, is set to make a cash bid worth C$26 per unit. The offer represents a premium of 12.8 percent to Primaris Real Estate Investment Trust's Tuesday closing price of C$23.04 on the Toronto Stock Exchange. Including the assumption of debt, the transaction is valued at about C$4.4 billion.

Primaris units, which previously touched an all-time high of C$24.93 in August on the TSX, surged about 15 percent to C$26.50 in early trading, indicating that investors were expecting a sweetened offer or rival bid to emerge.

Volumes in the typically thinly traded units surged more than 60 times above average and Primaris was the most actively traded name on the TSX, with its units closing C$3.36 higher at C$26.40 on Wednesday.

"This is round one of the negotiations," said Raymond James analyst Ken Avalos, who advised unitholders to hold out for a bid of C$28 or higher.

The offer comes as U.S. retailers, looking to expand into Canada, vie for prime real estate assets. Last year, Target Corp (TGT.N: Quote), the second-largest U.S. discounter, agreed to take over Canadian leases for some Zellers stores owned by Hudson's Bay Co (HBC.TO: Quote) in a deal worth some C$1.8 billion.

RioCan Real Estate Investment Trust, Canada's largest REIT, last year signed a C$1 billion joint venture to develop outlet malls in Canada with U.S.-based Tanger Factory Outlet Centers.   Continued...