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Key REIT owns more than 225 so-called small-box retail properties in eight provinces, with tenants such as KFC, Taco Bell, Tim Hortons and Shoppers Drug Mart.

Key REIT has come out fighting against a hostile bid for half the company, setting up the second contested play for control of a retail real estate player in as many months.

The real estate investment trust, formerly known as Scott's REIT, owns more than 225 so-called small-box retail properties in eight provinces, with tenants such as KFC, Taco Bell, Tim Hortons and Shoppers Drug Mart.

About two weeks ago, Huntingdon Capital Corp., which already owns more than 5 per cent of Key REIT, made a hostile bid for a further 45 per cent of the company's units, offering $7 cash per unit. In regulatory filings, Huntingdon said that if its bid succeeds, the actions that it may take include deleveraging Key REIT's capital structure, changing the composition of its board, selling some of its assets, terminating its chief executive officer, and potentially combining it with another company or taking it private.

On Monday, Key REIT issued a news release calling the offer "wholly inadequate, coercive, [and] highly opportunistic." It added that the bid fails to adequately compensate investors for the underlying value of Key REIT's assets and growth opportunities, and it has adopted a shareholder rights plan, or poison pill, effective immediately.

The clash comes after a two-month battle over shopping-mall owner Primaris Retail Real Estate Investment Trust, a much larger player in the industry. Primaris was put into play in December when a consortium led by KingSett Capital launched a hostile bid, a move that Primaris immediately rejected. This month, KingSett struck a deal with rival bidder H&R Real Estate Investment Trust in which those firms, and KingSett's partners, will divide Primaris's portfolio of more than 40 shopping centres and properties.

Key REIT's board has now formed a special committee to evaluate Huntingdon's bid, though its preliminary view makes its thoughts clear. In its statement Monday it said that Huntingdon is trying to gain effective control of the company for an "inadequate" offer price that is only a 13 per cent premium to the stock's closing price of $6.18 on Jan. 28, the day before Huntingdon announced its offer.

The rights plan that Key REIT has adopted will kick in if any individual or group obtains 15 per cent or more of the company, or announces an offer for the firm that does not meet certain conditions.

Huntingdon owns and manages 36 industrial, office, retail and aviation-related properties in Canada. It also owns about 30 per cent of FAM Real Estate Investment Trust.

In regulatory filings Huntingdon said that its CEO, Zachary George, met with John Bitove, the CEO of Key REIT, on Jan. 9 to "discuss whether he would be interested in a potential strategic combination."

"Following that meeting, Mr. George sent a non-binding offer to Mr. Bitove which expressed the offeror's interest in purchasing Mr. Bitove's external management contract and Key REIT units controlled by Mr. Bitove," the regulatory documents state. Huntingdon went public with its hostile bid on Jan. 29. The offer is open until March 7. Huntingdon would fund the offer, which could cost it up to $46.4-million, with cash on hand.