Cominar in bid to expand Canada property portfolio

Mon Nov 28, 2011 6:05pm EST
 
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By Pav Jordan

TORONTO (Reuters) - Cominar Real Estate Investment Trust CUF_u.TO, aiming to create Canada's second-largest diversified property portfolio, has offered to buy Canmarc REIT CMQ_u.TO in a hostile bid that values its rival at C$838 million ($800.4 million).

Canmarc's office and retail properties would increase Cominar's asset base by 42 percent and position it for further growth. Cominar, already the largest commercial property owner in the province of Quebec, would trail only H&R Real Estate Investment Trust (HR_u.TO: Quote) as Canada's biggest diversified REIT if the deal is completed.

Canmarc on Monday rejected the offer, saying it was not given enough time to look at the proposal carefully.

After the deal was announced, Canmarc units rose 18 percent to C$15.63 on the Toronto Stock Exchange as the company was effectively put into play in a market seen ripe for acquisition activity.

"Conditions for M&A are prime in the real estate world," said Alex Avery, an analyst with CIBC World Markets. "You've got abundant, cheap debt, strong property fundamentals and huge demand for stable income, particularly as the 10-year government of Canada bond hovers around 2 percent.

Canadian REITs benefited from market turbulence following the global financial crisis as investors looked to them as a high-yield haven for retirement savings and other capital.

15 PERCENT PREMIUM

Cominar will buy Canmarc units for C$15.30 in cash each, a 15 percent premium on the closing price on Friday. As an alternative, it offered 0.7054 of a Cominar unit for each Canmarc unit.   Continued...