KEYreit board says it's confident of finding an alternative to Huntingdon offer

TORONTO – KEYreit (TSX:KRE.UN) says its board is confident that it can find a superior alternative to the sweetened takeover offer announced Monday by Huntingdon Capital Corp.

KEYreit units traded as high as $7.42 on Tuesday and as low as $7.39 before the board’s announcement.

On Monday, KEYreit units hit a 19-month high of $7.47 after Huntingdon (TSX:HNT) increased its takeover offer for the retail property trust by 50 cents to $7.50 per unit or $7.4 million. It also relaxed one of the conditions for its hostile bid.

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 at $111.6 million.

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

Although the trust’s units hadn’t traded above $7.13 for at least a year before Huntingdon’s announcement and haven’t traded above $7.50 since August 2011, KEYreit advised unitholders Tuesday not to accept Huntingdon’s offer at this time.

The real estate trust said its board “remains confident that given the additional time granted by the Ontario Securities Commission last week and discussions with other parties that are currently taking place, it will be able to present unitholders with a superior alternative to Huntingdon’s revised offer of $7.50 per unit.”

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.

KEYreit, run by chief executive John Bitove, owns a portfolio of more than 200 small-box retail properties across Canada, with major tenants like Pharma Plus, Staples and East Side Mario’s.

On Monday, the trust 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.

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.

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