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Primaris CEO blindsided by hostile bid, calls offer insufficient

Dufferin Mall, one of the properties in the Primaris portfolio, is seen in this file photo.

Ryan Enn Hughes/The Globe and Mail

The CEO of Primaris Retail REIT was blindsided by the hostile $4.4-billion bid for the company that he runs. Now he's fighting back, saying the bid is insufficient given the company's prospects, especially as Target Corp. enters the market.

None of the bidders in the prospective takeover consortium – KingSett Capital, the Ontario Pension Board, or RioCan REIT – had ever broached the topic of buying Primaris in the past, John Morrison, the CEO of Primaris, said in an interview Thursday. The first inkling he had that they were about to launch a takeover came late Tuesday, when KingSett managing partner Jon Love asked to see Mr. Morrison and filled him in. The next morning the KingSett consortium's hostile offer was made public.

"We received no advance notice of this," Mr. Morrison said in the interview, having taken Wednesday to understand the situation before speaking publicly. He noted that the paperwork on an official offer has not yet been done, there is only a press release.

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It's an unusual occurrence in the relatively cozy world of Canadian real estate, where most of the major players – including Mr. Morrison and Mr. Love – know each other fairly well.

Primaris's board has assembled and is analyzing the situation, and the company will be appointing bankers on Thursday to advise it, Mr. Morrison said. It is also looking back over its shareholders right plan.

And Mr. Morrison is urging investors in his firm not to take any action, suggesting that bid of $26 per unit is insufficient given the company's prospects. The bid amounts to a 13.3 per cent premium to the volume-weighted average price of the units over the 20 trading days up to Wednesday.

"Target is opening in ten of our shopping centres next year and that's going to be a significant positive improvement in terms of the performance of those assets going forward," he said. "Over the last two and a half to three years we've been acquiring some very high quality enclosed shopping centres in Canada. We're seeing opportunities to perhaps acquire more. We've got a strong development program which sees us putting capital back into our existing shopping centres to increase the value of them."

He added that the company's units have traded as high as $24.93 this year on an intraday basis. "I think if you look at that level compared to what's on the table, it's not a very significant premium," he said.

Mr. Morrison also noted that Primaris has given its owners a 270-per-cent return since its IPO. "I view us as a young company, we're only nine years old," he said.

The company's unitholder base is largely made up of retail investors, and more than 30 per cent of the units are owned by non-Canadians, he added.

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