Good morning, and happy Friday!
RBC’s fund managers aren’t ready to let H&R GO. They’re opposing the REIT’s breakup and sale to GO Residential REIT and other buyers like Blackstone.
Over at broadcaster Corus Entertainment, the ownership change is a done deal: lenders have taken control.
Let’s get into it.
MARKET RUNDOWN
Yesterday’s Close
Oil surged following fresh tanker attacks near the Strait of Hormuz and shutdowns of nearly two-thirds of offshore oil production in the Gulf of Mexico ahead of Hurricane Isaias, lifting Canadian energy stocks and helping the TSX rebound +0.3%.
U.S. stocks fell as higher oil prices revived inflation fears, while a report that OpenAI’s annualized revenue was closer to US$50B (vs. the previously reported US$70B) weighed on AI-related tech stocks, dragging the Nasdaq down (1.3%).
Strong demand at an auction of 30Y U.S. government bonds helped bring Treasury yields lower.
BRIEF OF THE DAY
RBC’s Asset Management Arm Opposes H&R’s $6.7B Breakup and Sale
The news: RBC Global Asset Management plans to vote against H&R REIT’s (TSX:HR-UN) breakup and sale to GO Residential REIT (TSX:GO.U) and other buyers. RBC holds ~3.5% of the Toronto-based property owner’s listed units and joins Mill Pond Capital in opposing the deal.
Announced in August, the sale values H&R REIT at ~$6.7B including debt, and would divide its property portfolio among several buyers:
GO Residential REIT would buy H&R REIT’s U.S. apartment portfolio and other properties for ~US$2.8B, including debt.
Blackstone, PSP Investments, and Crestpoint would buy Canadian industrial properties through separate purchases.
CRAL (controlled by H&R CEO Tom Hofstedter’s family) would buy office, development, and other assets in exchange for cash and the cancellation of ~44M H&R REIT units held by the family group.
For public unitholders: Investors would receive $4.28 in cash + 0.5688 GO Residential REIT units, for every H&R REIT unit; a package worth ~$10.58 currently (down from ~$12.01 at announcement). The vote on the sale is scheduled for November 13.
The objections: Mill Pond Capital argues that CRAL, the family-controlled buyer, would acquire selected undervalued assets (i.e., below their stated net asset value), while public investors receive cash and units in a more leveraged REIT. It says insufficient pricing disclosure prevents investors from comparing the terms offered to the family with their own. RBC has not publicly explained its opposition.
H&R REIT’s board’s response: Independent trustees say CRAL’s willingness to acquire assets that attracted limited buyer interest, along with assuming associated liabilities, was essential to making the sale possible. They also cite fairness opinions obtained from CIBC and National Bank when the deal was agreed.
💼 The takeaway: When investors are paid in shares, approving a sale also means choosing a new investment. Here, H&R REIT investors must assess both GO Residential REIT’s leverage and prospects, and whether assets sold to insiders are fairly priced. Fairness opinions provide a view on financial fairness at a specific date; they do not guarantee the future value of new shares received.
HEADLINE RECAP
In Canada
RBC Global Asset Management opposes H&R’s (TSX:HR-UN) $6.7B breakup and sale to GO Residential REIT, Blackstone, and others (BBG)
Corus Entertainment (TSX:CJR.B) completes $500M debt-for-equity restructuring; lenders take 99% stake and new board is named (G&M)
Stephen Jarislowsky, founder of Scotiabank-owned investment management firm Jarislowsky Fraser, dies at 101 (BBG)
Carney’s major-projects bill passes key House vote with Conservative support, moves to committee review (G&M)
Canadian oil producers’ profits jump 68% QoQ while capital spending rises just 7%, Deloitte says (G&M)
Cold Lake First Nations asks Federal Court to overturn Pacific Link oil pipeline’s “national interest” designation (G&M)
Two First Nations object to Bell’s Saskatchewan AI data centre plans over consultation concerns (TL)
Export Development Canada (EDC) explores packaging and financing Canadian technology for overseas buyers (TL)
Canada’s instant-payment system likely to launch without Big Six banks in first phase, sources say (BK)
Canada’s proposed Financial Crimes Agency to prioritize crypto tracing, deputy minister says (G&M)
Toronto-based law firm McCarthy Tétrault to open office in Chile, expanding Latin America practice (G&M)
Cohere to open third Canadian office in Ottawa as local AI team expands (BK)
Aritzia (TSX:ATZ) raises full-year outlook after Q2 revenue jumps 44% and U.S. sales surge 60% (G&M)
DEALS WITH CANADIAN PARTIES
M&A & Investments
Audax Private Equity: The NYC-based PE firm retained a minority stake alongside management in Rensa Filtration after BCI and AEA Investors acquired joint control of the U.S. air filter maker and distributor.
Baird and Lincoln International advised Audax.
AutoCanada (TSX:ACQ): The Canadian dealership and collision repair group acquired two Colorworks Autobody shops in Coquitlam and Port Coquitlam, BC.
Eurodib: The Québec-based foodservice equipment distributor acquired Distex Group, a Canadian supplier of commercial refrigeration, cooking and stainless steel kitchen equipment.
VC & Growth Equity
Apero: The Montréal-based AI restaurant-reservation platform secured US$5M (~$7M) in Series A funding from Australia-based Now Book It, part of Montréal-based software holding company Valsoft.
David Baszucki: The Canadian-born Roblox co-founder backed U.K. quantum computer developer Universal Quantum in a US$100M+ (~$142M+) Series A co-led by DCVC and Firgun Ventures.
Lazard acted as exclusive financial advisor to Universal Quantum.
ECM
First Majestic Silver (TSX:AG): The Vancouver-based silver miner renewed its share buyback program for up to 10M shares (~2% outstanding) through October 2027; the miner repurchased 1.7M shares under its expiring program.
DCM & Credit
CIBC (TSX:CM) announced a $1.5B offering of senior unsecured bail-in notes due 2030, paying 4.20% until 2029 and a floating rate thereafter.
CIBC was sole bookrunner.
City of Winnipeg announced an additional $150M of its existing 4.65% bonds due 2064, bringing the total outstanding to $350M.
National Bank led the offering, with CIBC and RBC as joint lead managers.
BAY STREET TRIVIA
Which future tech billionaire (or trillionaire) once interned at Scotiabank?
FOR THE GROUP CHAT
