Melcor REIT has increased its take-private offer by 11%, but dissident unitholders quickly rejected it.

The debt-laden REIT and its parent Melcor Developments announced an amended proposal to take the REIT private, increasing the offer to $5.50 per unit from $4.95 per unit.

The revised arrangement includes a 90-day go-shop period to solicit alternative offers. Melcor Developments has waived its right to match any superior proposals.

As part of the amended terms, Melcor REIT cancelled its special unitholder meeting originally scheduled for Tuesday, delaying a vote on the take-private plan until after the “go-shop” period ends on February 24, 2025. Despite these changes, Firm Capital and Telsec Property Corporation, who describe themselves as “concerned unitholders” have deemed it inadequate and a misstep in the REIT’s strategic direction.

In a news release, Firm and Telsec said the meeting cancellation can only mean that Melcor REIT and Melcor Developments were not satisfied with the likely outcome; in order words, rejection of the original offer.

Melcor REIT and Melcor Developments argue that the revised offer represents fair value for unitholders. The amended deal has been approved by an independent committee of the REIT’s board and supported by fairness opinions from financial advisors, including BMO Capital Markets and Ventum Financial Corp.

The REIT and its parent also contend that the agreement includes several unitholder-friendly provisions, such as waiving termination fees for Melcor Developments in the event of a superior proposal and covering transaction-related costs.

However, Firm Capital and Telsec sharply criticized the move, claiming that the increased offer fails to meet their valuation of $6.94 per unit. The two minority unitholders argue that the proposal undervalues the REIT’s assets and accused Melcor of attempting to “circumvent” an unfavourable unitholder vote.

They also called for transparency regarding the voting tabulations from the now-cancelled meeting, which they believe would have shown overwhelming opposition to the original plan.

In their joint statement, Firm and Telsec continued to express disappointment with the take-private plan, giving the new proposal the same “take-under” label that they bestowed on the original offer.

“Melcor REIT has wasted a significant amount of unitholder money and resources negotiating the original arrangement agreement and preparing for the meeting, and is now burning through additional resources, rather than offering what we believe is a fair price to unitholders,” said Toronto-based Firm and Calgary-based Telsec.

Court and regulatory approvals are required for the proposed amended transaction, which has a tentative closing date in the second quarter of 2025.

Pictured: Melcor REIT property in Edmonton

Photo: Cushman & Wakefield