The Bay Street sign is pictured in the heart of the financial district as people walk by in Toronto.Mark Blinch/Reuters
Late last night, when reporters were supposed to be sleeping, Canmarc Real Estate Investment Trust announced that it has adopted a new unitholder rights plan. The move comes on the heels of a hostile takeover bid from Cominar REIT that values Canmarc at $838-million.
While the changes to the rights plan are important, it wasn't like the REIT didn't already have one in place. For that reason, the language in the press release was much more telling. (And full disclosure: I own Cominar.)
With hostile M&A bids, the target typically has two courses of action. Management can either ardently defend its success, and suggest that no price would be higher enough to top the value they expect to create, or they can hint at their openness to being sold to someone else.
When Cominar launched its bid last week, the target adopted the former tone, stressing that it had not been for sale. But the new press release suggests a shift. While management continues to defend its record, it urges unitholders to hold on until the special committee can finish its work Translation: until they can hopefully find another bidder.
Cominar and Canmarc have a history. Back in 2007, the two got into a battle over the acquisition of Alexis Nihon REIT. Though Cominar had initially signed an agreement with Alexis Nihon to merge the two companies, Canmarc (part of Homburg Invest at the time) came in and soured the deal, ultimately winning control of Alexis Nihon.
In consolation, Homburg agreed to the target's industrial and office properties to Cominar.
As for the unitholder rights agreement, Canmarc has lowered the trigger threshold to 15 per cent of outstanding units, rather than 20 per cent. This new level matters because Cominar has already acquired 15.1 per cent of Canmarc on the open market.
However, Cominar has been fathered in under the pre-existing rights agreement. To get around this, Canmarc has instituted a rule that states the rights plan will be triggered if Cominar acquires just one more per cent of the target's outstanding units.