Melcor Developments to Acquire Remaining Interest in Melcor REIT for $4.95 per Unit

Strategic Insights -

Melcor Developments, through an arrangement agreement, will acquire the remaining 45% unowned equity interest in Melcor REIT Limited Partnership for $4.95 per unit, totaling approximately 13.0 million units. This acquisition is expected to close in the fourth quarter of this year, subject to customary closing conditions. The REIT will use the proceeds to repurchase and cancel its outstanding participating trust units, offering holders $4.95 per unit in cash, representing a 46.0% premium to the REIT's closing unit price on September 12.

Key Takeaways:

  • The Arrangement Agreement will see Melcor acquire the remaining 45% unowned equity interest in Melcor REIT Limited Partnership for $4.95 per unit, totaling approximately 13.0 million units.
  • The REIT will use the proceeds to repurchase and cancel its outstanding participating trust units, offering holders $4.95 per unit in cash.
  • The consideration represents a 46.0% premium to the REIT's closing unit price on September 12, and a 61.3% premium to the 30-day volume-weighted average unit price.
  • The acquisition is expected to close in the fourth quarter of this year, subject to customary closing conditions.
  • The REIT's Board of Trustees, based on the recommendation of a special committee, has unanimously recommended that unitholders vote in favor of the transaction.
  • BMO Capital Markets and Ventum Financial Corp. have rendered fairness opinions, stating that the consideration is fair from a financial point of view as of September 12.
  • Ventum Capital Markets has delivered an independent formal valuation, concluding that the fair market value of the trust units is in the range of $3.50 to $5.00 per unit as of September 12.
  • The transaction is structured as a statutory plan of arrangement under the Business Corporations Act (Alberta).
  • Completion of the transaction will be subject to various closing conditions, including court approval and the approval of holders of trust units and special voting units.

Statistics:

  • $4.95 per unit: Consideration for the acquisition of the remaining 45% unowned equity interest in Melcor REIT Limited Partnership.
  • 13.0 million units: Total number of units being acquired by Melcor Developments.
  • 46.0%: Premium to the REIT's closing unit price on September 12.
  • 61.3%: Premium to the 30-day volume-weighted average unit price.
  • 4th quarter: Expected closing date of the acquisition, subject to customary closing conditions.
  • $4.95 per unit: Consideration offered to holders of outstanding participating trust units.
  • $46.0 million (plus accrued and unpaid interest): Amount to be paid to redeem the REIT's 5.10% convertible unsecured subordinated debentures.

Sources:

  • Arrangement Agreement between Melcor Developments and Melcor REIT Limited Partnership
  • News release from Melcor Developments
  • Management information circular to be filed with regulatory authorities and mailed to holders of trust units and special voting units.