TORONTO KEYreit (KRE_u.TO), which owns small retail properties across Canada, on Friday rejected an unsolicited partial takeover bid from Huntingdon Capital Corp HNT.TO, saying the proposal was inadequate, coercive and highly opportunistic.
"The partial offer fails to provide unitholders with an appropriate control premium for the units purchased, and provides no premium for units not purchased," said Donald Biback, who heads the property owner's board of trustees.
Richmond, British Columbia-based Huntingdon, which already owns 5.4 percent of KEY's issued and outstanding trust units, in late January made an offer to acquire about 6.6 million, or 45 percent, of KEY's units it does not already own for C$7 in cash per unit.
Toronto-based KEY, which owns over 225 retail properties in nine provinces across Canada, urged its unitholders to reject the Huntingdon proposal in its statement on Friday. It said its board of trustees and management, who own about 17 percent of KEY's issued and outstanding units, have all said they will not tender to Huntingdon's proposal.
KEY said its financial advisor BMO Capital Markets said the consideration offered by Huntingdon Capital is inadequate, from a financial point of view, to unitholders other than the bidder and its affiliates.
The company earlier this month adopted a poison pill in a bid to stymie the Huntingdon offer and plans to hold a special meeting of its unitholders on March 26 to approve the defensive tactic adopted by its board.
Canadian REITs, or real estate investment trusts, have outperformed the broader stock market in the last 12 months, driven by strong demand for both commercial and retail space.
Canada's benchmark S&P TSX composite Index .GSPTSE has risen less than 3 percent in the last twelve months, while the S&P TSX Canadian REIT Index .GSPTTRE has risen 11.4 percent, as U.S. retailers vie for prime retail space as they continue to expand north, even as economic growth has heightened demand for office space in Canada.
This, in turn, sparked a flurry of equity offerings from REITs last summer and pushed Canada's largest grocer, Loblaw's (L.TO), to announce that it plans to spin-off the vast majority of its property assets into a REIT.[ID:nL1E8N613S]
(Reporting by Euan Rocha; Editing by Chizu Nomiyama and Nick Zieminski)