Current Price – C$8.04
Buyout Offer – C$8.10 + dividend C$0.026
Upside – 1.2%
Expiration Date – Q2 2018
This low risk merger arbitrage situation was shared by Max.
Blackstone announced its acquisition of Pure Industrial Real Estate Trust on Jan 9th, 2018. This opportunity presents a simple cash arbitrage to earn a 1.20% gross return in less than 2 months. The deal is non-problematic since vote has already gone through and regulatory reviews present no hurdles as the pro-forma entity holds very little market share in the North American industrial leasing space.
On Jan 9, 2018, Pure Industrial Real Estate Trust (AAR-U.TO) and Blackstone (BX) announced an arrangement agreement whereby Blackstone Property Partners, a subsidiary of Blackstone, will acquire AAR-U for C$8.10/sh cash (there will also be C$0.026 dividend payout before closure). The bid values AAR-U at CAD$3.8bn enterprise value. The offer was unsolicited and unanimously supported by both sides. Closing is expected stated to be in Q2/18. I estimate closing to be April 18.
- Blackstone to file for Competition Canada ARC and ICA by Feb 9th, (20 business days from agreement date)
- AAR-U non-solicitation
- 5 Business days right to match for Blackstone.
- AAR-U shareholder approval (2/3+)
- Competition Act
- Investment Canada
- BPP Pristine and US REIT received tax opinion of KPMG
- 10% Dissent Cap
Termination fee of $77mm ($0.25/sh) payable by AAR if:
- AAR-U suffers MAC;
- AAR-U fails to reaffirm the current Blackstone bid in the event of a competing bid;
- AAR-U enters into superior proposal;
- Failure to close by Outside Date due to AAR-U’s misdoing or AAR-U shareholder vote rejection or AAR-U breach of warranties, representations or covenants when competing bid is present and not withdrawn prior to the termination of this agreement and within 12 months after a termination, AAR-U enters into a definitive agreement or consummates a transaction.
Reverse Termination fee of $220mm ($0.71/sh) payable by Blackstone if:
- Blackstone breach of representation, warranties or covenants;
- Blackstone failure to close the deal;
Dec 8, 2017 – Confidentiality Agreement
Jan 8, 2018 – Arrangement Agreement
Mar 23, 2018 – AAR-u shareholder vote
Q2/18 Expected Closing
Jul 9, 2018 – Outside Date