H&R REIT and KingSett Combine for Primaris Takeover Bid

H&R Real Estate Investment Trust and KingSett Capital Inc. joined forces in a C$2.75 billion ($2.75 billion) offer for Primaris Retail Real Estate Investment Trust, ending a bidding war for the Canadian shopping mall owner.

H&R and KingSett offered about C$28 a share in cash and stock for Primaris, the companies said today in a statement. That tops a C$27.33 a share cash and stock offer from H&R on Jan. 17 and KingSett’s unsolicited C$26 cash bid in December.

The combined group said the transaction would create the largest diversified Canadian REIT, owning office properties, industrial sites and shopping malls across the country. Primaris, based in Toronto, has 33 properties in 26 markets, including the Burlington Mall, Oakville Place and Place d’Orleans in Ontario, according to the company’s website.

“It is a good offer now and in our view, it’s time to move on,” Michael Smith, managing director for real estate equity research at Macquarie Capital Markets Canada, said in a telephone interview from Toronto. “We don’t think there will be a better bid.”

Primaris shareholders will receive C$28 a share in cash, up to a total of C$1.28 billion, or 1.166 units of H&R, according to the statement. Primaris closed at C$26.93 yesterday in Toronto, for a market value of C$2.64 billion. H&R closed at C$23.66, for a value of C$4.61 billion.

Portfolio Breakdown

H&R, based in Toronto, will buy a C$2.7 billion portfolio of 17 Primaris shopping centers, and nine more properties valued at C$377 million that Primaris intends to purchase before the deal closes. The remaining Primaris malls, valued at about C$1.9 billion including debt, will be acquired by a consortium led by KingSett, a Toronto-based private-equity real estate business.

RioCan Real Estate Investment Trust, a Toronto-based retail landlord and a member of the KingSett group, agreed to buy Oakville Place and a 50 percent stake in the Burlington Mall for C$362 million upon completion of the deal.

The transaction needs the support of two-thirds of Primaris shareholders and a majority of H&R investors. H&R and KingSett will receive a break fee of C$100 million if Primaris accepts another hostile bid.

A takeover would give the buyers “good real estate” in a market where deals of this size are infrequent, Smith said.

“It’s hard to buy assets in Canada because it’s a tightly held market,” he said. “Whenever there’s an opportunity to buy assets in bulk, it can be a good opportunity.”

Toronto-Dominion Bank and Canadian Imperial Bank of Commerce advised KingSett, while Canaccord Financial Inc. worked with Primaris.

Primaris rose 2.1 percent to C$27.50 at the close today in Toronto. H&R fell 0.7 percent to C$23.50.