Blackstone Inc., one of the world’s largest real estate investors, is jumping into the Toronto apartment market by bidding US$3.5-billion for rental property owner Tricon Residential Inc.
On Friday, New York-based Blackstone announced a friendly takeover offer for Tricon, which has US$2.5-billion of apartment buildings under development in Toronto and the potential to build US$1-billion of single-family homes in the U.S. sunbelt.
Founded in 1988, Tricon is one of Toronto’s largest rental apartment owners. The company also owns 37,000 single-family homes in cities such as Atlanta, Charlotte, Dallas, Tampa and Phoenix.
“We are excited that our capital will propel Tricon’s efforts to add much needed housing supply across the U.S. and in Toronto, Canada,” said Nadeem Meghji, global co-head of Blackstone real estate, in a news release.
Blackstone is offering $15.17 per share for Toronto-based Tricon, a 30-per-cent premium to the stock’s closing price Thursday, prior to the announcement of the offer. Blackstone currently owns approximately 11 per cent of Tricon’s shares on a fully diluted basis, after investing US$300-million in convertible preferred shares in 2020.
Tricon’s board of directors supports Blackstone’s bid. Peter Sacks, chair of the special committee that reviewed the offer and Tricon’s lead director, said in a news release the real estate company ran a sales process and “concluded that the transaction with Blackstone is in the best interests of Tricon and its shareholders, and that the transaction price represents compelling and certain value.”
One of Tricon’s largest shareholders, Land & Buildings Investment Management LLC, announced an activist campaign in October aimed at boosting the company’s share price, which was below $10 per share. The asset manager, founded by real estate analyst Jonathan Litt, previously successfully pushed for change at Hudson’s Bay Co.
On Friday, Land and Buildings came out in support of Blackstone’s bid. “Consistent with our public presentation made in October 2023 that highlighted an estimated 65 per cent upside, we believe this is the right outcome for all shareholders,” said Land and Buildings in a statement. “We have been pleased with our engagement with the management and the board over the past few months.”
Blackstone’s offer for Tricon includes the right to match any superior bid from a rival company. If Tricon’s board accepts a richer offer prior to March 3, the company will pay Blackstone a US$61.3-million termination fee, or less than 2 per cent of the transaction’s value.
The termination fee doubles to US$122.8-million if Tricon opts for another suitor after March 3, a level consistent with the fees seen in large takeovers. If Blackstone terminates the takeover, it will pay Tricon a US$526-million reverse break fee.
Tricon shares trade on the Toronto and New York stock exchanges. On Friday, Tricon’s stock price jumped 28 per cent to $14.93 on news of the takeover, slightly below Blackstone’s offer.
Tricon’s financial advisers on the takeover are Morgan Stanley & Co. LLC and RBC Capital Markets LLC, and its legal advisers are Goodmans LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP. Scotiabank is advising Tricon’s special committee, along with law firm Osler, Hoskin & Harcourt LLP.
Goodmans LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP are acting as legal counsel to Tricon in connection with the Transaction and Osler, Hoskin & Harcourt LLP is acting as independent legal counsel to the Special Committee.
Blackstone’s advisers are BofA Securities, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Wells Fargo, plus two law firms, Simpson Thacher & Bartlett LLP and Davies Ward Phillips & Vineberg LLP.
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2024-01-19 15:01:26Z
CBMiT2h0dHBzOi8vd3d3LnRoZWdsb2JlYW5kbWFpbC5jb20vYnVzaW5lc3MvYXJ0aWNsZS1ibGFja3N0b25lLXRyaWNvbi1yZXNpZGVudGlhbC_SAQA
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