Under the deal announced Tuesday, some of the Primaris properties will be bought by the KingSett Capital consortium but H&R Real Estate Investment Trust (TSX:HR.UN) will end up owning Primaris and the rest of its portfolio.
The three CEOs for H&R, KingSett and Primaris described the deal as a win-win-win for their stakeholders.
"We're acquiring the vast majority of what we really wanted," said Thomas Hofstedler, president and chief executive of H&R.
He said H&R will become Canada's largest diversified real estate trust after adding the Primaris shopping malls to its retail segment, which will account for 51 per cent of the REIT's overall net operating income after the deal.
"We selected the high-qualify assets that are most closely aligned to our conservative acquisition strategy and enabled a broader portfolio diversification geographically. We've also obtained a valuable new management platform."
Primaris unitholders will end up with about 25 per cent of H&R's equity, assuming the deal goes through as planned, giving them the opportunity to continuing in the real-estate sector through the enlarged H&R.
Primaris CEO John Morrison says the revised offer provides a larger cash portion than under the previous agreement with H&R.
"So it's a superior offer and one that our board obviously supported," Morrison said.
"It's a $4.6-billion transaction," he said. "KingSett's cash contribution is approximately $1.9 billion and H&R is taking $2.7-billion of assets."
The KingSett consortium, which had started the bidding last year but was rejected in favour of H&R, will acquire 18 of the Primaris properties.
"In today's deal, we each get what we really want," said Jon Love, managing partner of KingSett Capital, which approached H&R with a compromise on behalf of a consortium that included Ontario Pension Board and RioCan REIT.
"This transaction is one that we're all very pleased about," Love said.
"We approached H&R with an idea that we thought would create value for everyone and then it was an iterative process after that."
H&R is offering Primaris unitholders $27.98 per unit — about 65 cents per share above a previous friendly agreement between the two income trusts.
Through that part of the deal, worth a total of $2.7 billion (up to $1.28 billion in cash) and the rest in units of the real estate trust, H&R will acquire 17 existing Primaris shopping centres plus nine other properties that Primaris is buying.
Primaris units edged up 50 cents to $27.43 on the Toronto Stock Exchange after the announcement. H&R units fell 23 cents to $23.43 and units of RioCan REIT (TSX:REI.UN), a member of the KingSett consortium, rose 21 cents to $27.