$4.4B hostile bid for Primaris shopping mall REIT launched

A Bay Street consortium backed by money from pension funds has launched the largest ever takeover attempt of a Canadian REIT by offering $4.4 billion for Primaris, which owns and operates shopping malls.

A group led by KingSett Capital is proposing the hostile bid for Primaris Retail Real Estate Investment Trust, one of Canada's largest shopping mall operators.

KingSett is a private real-estate investment firm working with the Ontario Pension Board and two other asset managers based in Quebec and Alberta — the Caisse de depot’s Ivanhoe Cambridge and AIMCo.

The group is offering $26 for every Primaris unit, a 12.8 per cent premium to where the shares traded at before the offer was announced.

“This is a strong and compelling offer, providing unitholders with a premium price at a time of peak valuations in the sector,” said Jon Love, managing partner of KingSett Capital.

“The all-cash offer provides Primaris’ unitholders with an attractive opportunity to obtain immediate liquidity in the face of economic uncertainty and volatile markets. We firmly believe that this offer will be very appealing to unitholders.”

As a condition of the Primaris offer, RioCan REIT has agreed to buy five regional malls and three other shopping centres currently owned by Primaris, in a deal RioCan says is worth $1.1 billion.

“The properties we have committed to purchase are fully aligned with our strategy,” said Edward Sonshine, RioCan’s chief executive.

“We look forward to completing this transaction with KingSett Capital and to building on our existing strong relationship with them.”

But despite the premium price offered for Primaris owners, the deal is not a certainty to be accepted. That's because REITs are prized by retail investors for their steady unit prices and hefty dividend payouts.