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A $6.7-billion deal which would have seen H&R REIT (HR-UN-T) broken up and divided among a group of buyers in the U.S. and Canada has been terminated after unitholders voted against the transaction today.
H&R REIT said written notice has been delivered to the buyers group - which was led by GO Residential REIT (GO-U-T) and an Ontario numbered company and included Blackstone funds, Crestpoint Real Estate Investments, PSP Investments and a company, CRAL, controlled by the family of H&R executive chairman and CEO Tom Hofstedter - of the immediate termination of the deal.
The proposed takeover deal had faced mounting opposition since it was first announced on Aug. 11.
Daniel Farb, the managing member of Mill Pond Capital, was the first investor to openly oppose the deal, releasing a public letter on Oct. 7, citing concerns over aspects of the deal related to CRAL.
His concerns were echoed by other unitholder groups. Both proxy advisers who evaluated the proposed deal - Institutional Shareholder Services Inc. and Glass Lewis & Co. - recommended against it.
H&R said, under the terms of the transaction, no termination fee will be payable by H&R to the consortium of purchasers.
Board to be refreshed, will plan CEO succession
In announcing the deal's termination, H&R independent lead trustee Stephen Gross said the board had listened closely to unitholders.
"The H&R Board of Trustees brought this transaction to a unitholder vote with a view to maximizing unitholder value through an en bloc transaction, which it considered the most certain and actionable path and in the best interests of H&R," Gross said.
"Since mid-August, we have met with a number of unitholders and listened closely to their perspectives on the proposed transaction. We appreciate their views and respect the outcome of today's vote."
Gross said the board is committed to surfacing "unitholder value through asset sales, and a board refreshment process that will include CEO succession planning."
H&R intends to replace up to four members of the board with new independent trustees by the end of this year.
"The mandate of the refreshed Board will include CEO succession planning to ensure that H&R has the leadership in place to execute on its strategy," the announcement said. "Throughout this process, the Board looks forward to engaging with significant unitholders and other stakeholders."
Distributions and special payout
The REIT reinstated its $0.05 per unit monthly distribution, declaring a $0.15 per unit catch-up payout for the three suspended months, and plans a special distribution of approximately $2.30 per unit before year-end (subject to lender approval).
H&R will also remain publicly traded on the TSX under the ticker symbol HR.UN.
"The REIT intends to pursue opportunities to surface value through asset and portfolio sales with an aim to create a simplified value driven REIT, which may include the sale of the REIT's industrial properties," the announcement said. "The Board will evaluate the best use of proceeds of any such sale, which may include distributing cash to unitholders, paying down debt, or repurchasing of units."
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