Plazacorp/KEYreit
Overview
Offer by Plazacorp for units of KEYreit. The consideration is a combination of cash and Plazacorp shares (with the ability to make an s 85 election), with such consideration being at the election of the KEYreit unitholder but with the overall cash and share proportions fixed at 50-50. The consideration (valued at $8.35 per KEYreit unit) represents a 35% premium over the closing price when the rival Huntingdon offer was announced. (The Huntingdon offer was varied and extended, most recently, on April 1, 2013.)
Plazacorp
Plazacorp is a retail property owner and developer which intends to graduate from the TSX-V to the TSX, was incorporated in B.C. and owns a portfolio of 119 properties, and additional lands held for development. Although it is a mutual fund corportion for income tax purposes,
on March 25, 2013, Plazacorp received a positive ruling from the CRA in respect of converting from a mutual fund corporation to a REIT structure on a tax-deferred basis. Completion of this conversion is expected to occur in 2013….
KEYreit
KEYreit is listed on the TSX, and was formerly Scott's REIT. It has stated that it believes it will continue to qualify as a REIT for Canadian income tax purposes. It has 14.9M units outstanding, plus debentures convertible into a further 6.47M units.
Offer
Plazacorp is offering to purchase each outstanding KEYreit (incluidng those resulting from conversion of debentures or other securities) for
- $8.35 per unit in cash
- 1.7041 Plazacorp shares, or
- any combination thereof
provided that the aggregate cash consideration is limited to $62.15M and the maximum share consideration is limited to the equivalent of ½ the outstanding KEYreit units (after giving effect to debenture conversions). Conditions for the offer include the deposit of units (without withdrawal) representing (i) (together with any units of Plazacorp) at least 66 2/3% of the outstanding KEYreit units and (ii) at least a majority of the outstanding units the votes of which would be included in any minority approval of a Subsequent Acquisition Transaction pursuant to MI 61-101. The offer price is adjusted for defined distributions by KEYreit.
U.S. Securities Laws
The offer is being made in the U.S. with respect to units of a foreign private issuer. The Plazacorp shares are being offered pursuant to the Rule 802 exemption. Ineligble U.S. Unitholders that would otherwise receive Plazacorp shares may have those shares issued on their behalf to a selling agent, which will remit the net proceeds of sale on the TSX-V to such Ineligble U.S. Unitholders.
Subsequent Acquisition Transaction
If a Compulsory Acquisition Transaction (based on 90% of the units being taken up) is not available (or availed of), Plazacorp will use commercially reasonable efforts to implement a Subsequent Acquisition Transaction, and intends units acxquired under the offer to be voted in favour of any such transaction. A Subsequent Acquisition Transaction may take the form of an amendment to the Declaration of Trust to provide for the redemption by KEYreit of all outstanding (non- Plazacorp) units or the purchase therof by Plazacorp.
Canadian tax consequences
Residents. In the absence of an s. 85 election, the exchange will occur on a non-rollover basis. The deadline for providing an s. 85(1) election form to Plazacorp is 45 days after the take-up of units (failing which, the joint election will not be made). Capital gains/loss treatment will apply to dissenters except re interest.
Non-residents
Non-resident unitholders whose units are redeemed by KEYreit in a Subsequent Acquisition Transaction will be subject to Part XIII.2 (and/or Part XIII) withholding on the full proceeds. Standard taxable Canadian property disclosure.
Plazacorp
Standard mutual fund corporation disclosure.