THE war of the Reits between MacarthurCook Industrial (MI-Reit) in one corner and Cambridge Industrial Trust (CIT) in the other hit a new level yesterday when both firms called trading halts to make announcements.
Their simmering row has mostly been confined to full-page newspaper advertisements but it has intensified in the run-up to Monday’s key meeting to vote on MI-Reit’s financing plans.
CIT was first to go in what turned into an action-packed day for bemused and baffled traders.
It halted trading before the morning session got underway to clarify that it would vote against MI-Reit’s financing proposal and added that it is finalising its own fund-raising plans.
CIT also said that it has no plans to make an offer to merge the two Reits. It added that once this intention has been made known, it cannot make an offer for the next six months.
The Reit resumed trading at noon.
MI-Reit had already called for a trading halt from 10.40am, probably to prepare a response to CIT.
This did not emerge until 3pm – one hour after CIT had called for its second trading halt of the day.
Observers speculated that CIT’s halt was likely to clarify and expand on points in its morning announcement. The trust stayed suspended until the market closed.
Meanwhile, MI-Reit took aim at CIT. Mr Nick McGrath, the chief executive of the MI-Reit manager, stressed that there is no offer on the table from CIT.
He said that ‘CIT has no financial facilities in place to address MI-Reit’s funding requirements’.
Mr McGrath said that investors should be aware that ‘CIT has still not confirmed whether the manager of CIT can legally be the manager of two industrial Reits’. This refers to a CIT proposal that its manager could run both Reits. Managing a larger pool of assets should benefit both sets of unit holders, CIT said.
Mr McGrath argued that ‘the announcement strongly reinforces our… position that CIT has no offer to unit holders or solution which addresses the critical issues facing MI-Reit’.
Yesterday’s skirmish raised the stakes even higher for Monday’s extraordinary general meeting.
MI-Reit wants unit holders to back a $430-million rescue package involving a share placement to ‘cornerstone’ investors, a rights issue and $215 million in loans.
It needs to raise cash to refinance $226 million in loans and meet a $90-million obligation to buy the 1A International Business Park property by the end of the year.
But CIT, which holds a 9.76 per cent stake in MI-Reit, attacked the package on Monday, branding it ‘value-destructive’ for existing unit holders as the discount offered to the new key investors is far too steep.
CIT’s move ignited the tit-for-tat exchange of newspaper ads aimed at winning the hearts and minds of MI-Reit unit holders before Monday’s showdown.
Traders tried to make sense of it all yesterday once the dust had settled.
On the share front, CIT was half a cent down at 42.5 cents but trading remains suspended while MI-Reit, which resumed trading after 3pm, was unchanged at 40 cents.
Observers say that regardless of the merits of MI-Reit’s proposals, CIT holds only about 10 per cent of the units so it is far from certain that it can muster enough support to block the financing proposal on Monday.
As much of the stakes in MI-Reit are held in nominee accounts, it is not clear who the other main unit holders are and how much they own.
If the units are spread among many retail unit holders, it may be more difficult to amass enough support.
Source: Straits Times, 20 Nov 2009
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