Primaris REIT chief financial officer Louis Forbes, left, and chief executive officer John MorrisonSami Siva/The Globe and Mail
Primaris Retail REIT got next to no warning that it was going to be the target of a $4.4-billion hostile bid from a group led by KingSett Capital because the would-be buyers wanted to be able to get the deal done fast.
Often a hostile bid is a last resort after talks to reach a friendly deal fail. In this case, there were no talks and Primaris was taken completely by surprise. (Read more about that here.) KingSett is arguing that the tactic does not mean the bid is not hostile, but going straight to shareholders is not considered a friendly move no matter what anyone says. It's unlikely to endear KingSett to its target.
The buyers went this route because of one big factor: speed. KingSett wanted to get a deal done fast because of all the moving parts in its consortium, which includes multiple pension funds as well as RioCan REIT. They are all committed, but a long wait to close a transaction can be challenging for a club bid.
Trying for a friendly deal could have slowed things down as Primaris might well have asked for time to conduct a market check to make sure there were no other bidders, and would have likely asked for a standstill agreement from KingSett that would have limited KingSett's options. As a result, the call was made to go with an unsolicited bid.
If no other bidders emerge, and Primaris is unable to slow the process more than usual using a shareholder rights plan, an offer made directly to shareholders can be wrapped up in six to eight weeks.
Here is what Jon Love, the head of KingSett, told the Globe's Tara Perkins:
"This is a large deal with several parties at the table and a very complicated bid to put together, so once that is put together going directly to the unitholders is simply the most efficient and practical way forward."