Loblaw Soars on REIT IPO Plan, George Weston Rises Too

Dec. 6 (Bloomberg) -- Loblaw Cos. posted its biggest gain in 25 years after Canada’s largest grocery chain said it will create a real estate investment trust and sell units in an initial public offering.

Loblaw rose 14 percent to C$38.20 at market close in Toronto, its biggest intraday jump since October 1987, according to data compiled by Bloomberg. The rise gave George Weston Ltd. a paper gain of about C$771.4 million ($778.3 million) from its holdings of about 60 percent. George Weston, 63-percent owned by W. G. Galen Weston, surged 6.8 percent to C$67.71.

Loblaw plans to contribute about 35 million square feet of real estate with a current value of more than C$7 billion, and intends to retain a “significant” majority interest, according to a statement today.

The REIT will be one of Canada’s largest, Brampton, Ontario-based Loblaw said. The IPO is expected to be completed next year pending regulatory approvals and authorization to list the units on the Toronto Stock Exchange, the company said.

“We expect the REIT to not only unlock value for our shareholders, but also increase our financial capacity to pay down debt, buy back shares, and create a long-term source of capital to invest and grow,” Galen Weston, Loblaw executive chairman, said in the statement.

The contributed real estate portfolio will be largely retail focused and comprise a geographically diverse mix of stores and shopping centers, and will also include warehouses and office buildings, the statement said.

“It’s positive no matter how you look at it,” Brian Yarbrough, a consumer analyst at Edward Jones, said in a phone interview from St.Louis. “The real estate is going to unlock value. Loblaw will have significant revenue generated from their interest in the REIT -- though near-term it doesn’t change a lot.”

To contact the reporter on this story: James Callan in New York at jcallan2@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Robin Ajello at rajello@bloomberg.net