KEYreit jumps to 19-month high on sweetened takeover offer from Huntingdon

VANCOUVER – KEYreit units hit a 19-month high Monday after Huntingdon Capital Corp. (TSX:HNT) increased its takeover offer for the retail property trust by $7.4 million and relaxed one of the conditions for the hostile bid.

KEYreit units (TSX:KRE.UN) traded as high as $7.47 after the pre-market announcement, but gave up some of their gains later in the session.

Huntingdon’s new offer is $7.50 per unit, 50 cents higher than before.

Vancouver-based Huntingdon already owns about 5.4 per cent of KEYreit so the new offer would cost it $106 million to buy out all the units it doesn’t already own. The bid values KEYreit as $111.6 million.

The real estate trust’s shares closed up 44 cents or six per cent at $7.41 on the Toronto Stock Exchange. Huntingdon shares were down eight cents at $12.70.

The KEYreit board has been urging unitholders to reject Huntingdon’s bid, saying its units were worth between $7.50 and $8 each.

However, the trust’s units hadn’t traded above $7.13 in the past year until the announcement Monday. They haven’t traded above $7.50 since August 2011.

KEYreit, run by chief executive John Bitove, owns a portfolio of more than 200 small-box retail properties across Canada.

On Monday, it announced a $10-million acquisition of two retail properties in Alberta. The deal, which will add 24 Shoppers Drug Mart (TSX:SC) locations, is expected to close in mid-April.

On Friday, the Ontario Securities Commission rejected Huntingdon’s request to remove a shareholder rights plan put in place by KEYreit’s board to block the takeover and give it time to explore alternatives.

ISS Proxy Advisory Services recommended that unitholders vote against the proposed rights plan, but did not make comment on the takeover offer.

Huntingdon said Monday it was still willing to offer either all cash or a combination of cash and units. The new combination offer includes $5.625 in cash and about 0.15 of a Huntingdon common share for each KEYreit unit.

Huntingdon also said it was willing to acquire a minimum of 45 per cent of KEYreit’s outstanding shares — down from the previous threshold of 50 per cent.

The new offer will be open until April 1. The previous offer was due to expire Monday.

Huntingdon has 36 office, retail and industrial properties throughout Canada and owns 30 per cent of FAM Real Estate Investment Trust (TSX:F.UN).

Note to readers: This is a corrected story. An earlier version incorrectly stated that ISS recommended unitholders vote against the Huntingdon offer.