TORONTO (Reuters) - Cominar Real Estate Investment Trust (CUF_u.TO), aiming to create one of Canada’s largest diversified property portfolios, has offered to buy Canmarc REIT CMQ_u.TO in a hostile bid that values its rival at C$838 million ($800.4 million).
Cominar offered C$15.30 in cash per unit of Canmarc on Monday, a 15 percent premium on its last closing price on Friday. As an alternative, it has offered 0.7054 Cominar units for each unit of Canmarc.
Cominar, which is the largest commercial property owner in the province of Quebec, said it has already raised its stake in Canmarc to 15.1 percent through a private agreement to purchase about 3 million units. That makes it the second-largest unit holder in the REIT.
Canmarc units rose 18 percent to C$15.63 in Toronto on Monday morning.
The board of trustees of Canmarc said it rejected Cominar’s initial attempts to discuss the offer, in part because of Cominar’s demand that Canmarc respond to the bid within two days.
“Given the REIT was not for sale and that it continues to successfully execute on its business plan, it is unreasonable to ask the REIT to respond to their proposal within a 48-hour window”, said Karen Prentice, chairwoman of the Canmarc board as well as a special committee formed to evaluate the deal and look at other options.
Cominar says that buying Canmarc would increase its asset base by 42 percent, creating Canada’s second-largest diversified REIT and positioning the company for further growth.
Canmarc owns a portfolio of Canadian office and retail properties. The 18-month-old REIT changed its name in September from Homburg Canada Real Estate Investment Trust, a move it said was meant to reflect its broadening strategic focus.
Canadian REITs have benefited from the market turbulence in the wake of the global financial crisis as investors have looked to them as a high-yield haven for retirement savings and other capital.
The Canmarc transaction would add immediately to Cominar’s distributable income, funds from operations and adjusted funds from operation, the company said.
National Bank of Canada, Bank of Montreal and Caisse Centrale Desjardins have provided Cominar with a commitment to fund the cash offer for Canmarc units.
Under the unit alternative, Canmarc shareholders would see an increase in monthly cash distributions of about 6.9 percent, Cominar said, as well as participating in the growth of the company.
Reporting by Aftab Ahmed in Bangalore and Pav Jordan in Toronto; Editing by Sreejiraj Eluvangal and Peter Galloway