UPDATE 3-Loblaw to spin real estate into REIT, stock soars

Thu Dec 6, 2012 2:50pm EST
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* Loblaw to sell most of its real estate assets into REIT

* Move will allow Loblaw to reinvest in its core business

* Loblaw, George Weston shares surge on the TSX (Adds comments from chairman, analysts; updates share move)

By Euan Rocha

TORONTO, Dec 6 (Reuters) - Loblaw Companies Ltd, Canada's largest grocer, said on Thursday it plans to spin off the vast majority of its property assets into a real estate investment trust, sending its stock and that of its parent, George Weston, surging higher.

The move, which will create one of Canada's biggest REITs, is a way to allow Loblaw to reinvest in its core business and boost shareholder value. Loblaw shares jumped more than 24 percent in early trading, while George Weston rose 11 percent.

The company said it plans to spin off real estate worth more than C$7 billion ($7.05 billion) into the REIT and sell units of the trust through an initial public offering that it hopes to complete by mid-2013.

"We are announcing this today because we feel the timing is right for both our business and the capital markets," said Galen Weston, Loblaw's executive chairman, on a conference call. "The size and quality of our real estate assets should be appealing to investors."

Canadian REITs have outperformed the broader stock market due to strong demand for commercial and retail real estate. Economic growth has boosted demand for office space in Canada, while U.S. retailers compete for prime retail space for their Canadian growth plans.   Continued...