(Reuters) - H&R Real Estate Investment Trust (HR_u.TO) sweetened its offer for Primaris Retail REIT PMZ_u.TO, after persuading rival bidders led by KingSett Capital to split Primaris between them.
Units in Primaris, which has yet to react to the offer, jumped 1.8 percent in early trade on the Toronto Stock Exchange on Tuesday.
H&R raised its cash-and-stock offer by 2.4 percent to C$27.98 per unit from its earlier bid of C$27.33 per unit, valuing Primaris at about C$2.8 billion.
H&R will get Primaris' operating platform and 25 shopping centers while the KingSett Capital-led consortium, which includes the Ontario Pension Board and RioCan Real Estate Investment Trust REI_u.TO, will buy the remaining 18 properties in the Primaris portfolio.
Under the deal, RioCan, Canada's largest REIT, will buy two malls in the greater Toronto area for C$362 million.
Primaris owns some 35 properties in cities across Canada, including the Dufferin Mall in Toronto, the Cornwall Centre in Regina, Saskatchewan, and the Tecumseh Mall in Windsor.
Its tenants include many Canadian household names such as Hudson's Bay, Canadian Tire (CTC.TO) and Reitmans RET.TO. It also owns about 10 Zellers outlets, which are currently being converted into Target stores.
H&R said the revised transaction will boost its funds from operations, reduce its overall leverage ratio and increase market capitalization and liquidity.
H&R and KingSett are entitled to a break-up fee of C$100 million as part of the deal.
Reporting by Euan Rocha in Toronto and Shounak Dasgupta in Bangalore; Editing by Maureen Bavdek, Sreejiraj Eluvangal