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Cominar CEO Michel Dallaire

Cominar Real Estate Investment Trust has reached a friendly deal to acquire Canmarc REIT after boosting its cash offer in a bid to become one of the country's largest integrated real estate companies.

Quebec-based Cominar won the unanimous support of Canmarc's board after increasing its offer by more than 7 per cent to $905.4-million.

"Through the acquisition of Canmarc, Cominar will become a true national real estate champion with a leading position in Quebec," Cominar chief executive officer Michel Dallaire said Monday during a conference call."

He said the acquisition accelerates Cominar's growth strategy by adding key assets in Western Canada and Atlantic Canada and will help its efforts to attain an investment grade credit rating.

Cominar, which had been chasing a hostile bid for Canmarc since late last year, said Monday that the offer is now for $16.50 in cash per Canmarc unit, or 0.7607 trust units of Cominar.

That's an increase from $15.30 cash for each unit, or $840-million and represents a 24-per-cent premium over the Nov. 25 closing price before Cominar announced its takeover plans.

The transaction will boost Cominar's asset base by about 45 per cent to over 30 million square feet, particularly in Quebec where it expects up to $5-million in administrative synergies in the next year.

Cominar owns a real estate portfolio of 269 properties including 53 office, 55 retail and 161 industrial and mixed-use buildings.

Canmarc owns 464 multi-family residential units, primarily a 27-storey tower in Montreal, in addition to income-producing commercial properties totalling 8.7 million square feet of gross leasable area.

Mr. Dallaire said the deal will help the company pursue its efforts to double its portfolio in five years.

Canmarc president and CEO Jim Beckerleg said the improved offer fully recognizes the "the merits and growth opportunities" of its business.

"We are now quite comfortable recommending this higher bid to all our unitholders," he told analysts.

The deal includes a $30-million termination fee payable to Cominar if the transaction is not completed and gives Cominar five days to match unsolicited proposals.

The deal is expected to close Jan. 27 and requires the tendering of at least two-thirds of Canmarc units. Cominar said it expects to win Competition Bureau approval.

"This is going to be an exciting time for the unitholders of both of our companies … and personally I'm really looking forward to seeing the next chapter in the combination of these two businesses as it unfolds," Mr. Beckerleg added.

The combined company will have an enterprise value of $4.8-billion with 79 per cent of assets in Quebec, 9 per cent in Western Canada, 7 per cent in Atlantic Canada and 5 per cent in Ontario.

The portfolio will include 47 per cent offices, 30 per cent retail, 22 per cent industrial and 1 per cent multi-residential.

"We believe the two portfolios are complementary and that Cominar and Canmarc are a natural match," wrote Neil Downey of RBC Capital Markets.